Suburban office building owners will have to wait a bit longer to lease their office space, according to Cushman & Wakefield’s office and industrial real estate outlook report.
Vacancy rates are expected to increase to 14.1% in the first quarter of 2011, up from 12.4% in the first quarter of this year. Newly constructed office space is the primary contributor to the increase as demand remains stagnant in municipalities like Burnaby and Richmond, two of the largest office markets in the region.
Office vacancy in Burnaby climbed above 10.1% in the first quarter of 2010 and will likely increase as more supply enters the market during the next few months. The report expects rents in Burnaby to stabilize by 2012 as landlords react to the market and provide competitive rates, turnkey space and other inducements.
Being more central and serviced by two SkyTrain transit lines, Burnaby may benefit from some tenants who may decide to move due to rising costs in downtown Vancouver’s tight market. With extremely low vacancy rates of premium space, tenants are facing a $7 to $10 per square foot increase upon renewal of their leases.
The report found Class A space with a view in downtown Vancouver attracted lease rates of about $38 to $40 per square foot. Non-view spaces in the same building reached $25 per square foot and are expected to climb.