Metro Vancouver's office vacancy rate inched upward in 2008 as the prevailing economic decline muted overall demand, according to Avison Young's year-end office market report.
The region's average vacancy rate rose to 5.4% in December, up from 5% in mid-2008 and 4.8% in December 2007. An increase in the amount of sublease space, corporate downsizing, minimal new tenant demand and new inventory in the suburbs were the main reasons for the increase.
Richmond posted the highest jump in vacancy rates: to 15.4% from 12.3% in mid-2008 and 11.5% at the end of 2007. The increase is attributed mainly to the completion of Sun Life's Airport Executive Park 6, which added 65,000 square feet of office space in the city.
Company shrinkage also added to Richmond's vacancy rates. Ritchie Bros is moving from its space at 13911 Wireless Way to Burnaby when Glenlyon Business Park is complete. Microsoft is subleasing 55,935 square feet of space that it never occupied, and Nokia is leaving its space at Fraserwood Corporate Centre in mid-2009.
Meanwhile in downtown Vancouver, sublease offerings increased 70% to 516,627 square feet from 304,395 square feet in mid-2008. Intrawest is marketing 48,000 square feet for sublease as part of its plan to reduce and consolidate its office space. Electronic Arts is offering one and a half floors for sublease at its EA Black Box studio at 250 Howe Street. EA plans to return its entire 85,000-square-foot space to the market by the end of 2009.
Avison Young said deal volumes will also decline in 2009 due to relatively tight space availability and executives postponing major decisions as they ride out the recession.