Weak demand pushed Metro Vancouver office vacancy to a 10-year-high of 9.6% at the end of September, according to a Colliers International report released October 20.
With 2.2 million square feet of office space under-construction in the downtown core, the rate will undoubtedly continue its upward trajectory and perhaps soon hit 13%, Colliers’ Vancouver managing director Maury Dubuque told Business in Vancouver.
“We’ve been in a very landlord-favourable market for almost 10 years,” he said. “A balanced market is between 8% and 10% vacancy but the dynamics of the market have been one way for quite a while. Now, with the delivery of new buildings that will change.”
The regional vacancy rate has been between 6% and 8% for most of the past four years.
The region saw 153,000-square-feet of new supply added in the quarter, making the total inventory about 54.6 million square feet of office space.
Tenants only absorbed an additional 18,463 square feet of that space during the quarter.
The best performing areas were Vancouver outside downtown and Langley as both had slight decreases in office vacancy during 2014’s third quarter compared with the second quarter. All other areas saw a rise in the office vacancy rate.
New Westminster had the biggest quarterly office vacancy rate spike, thanks to the empty 137,000 square foot Anvil Centre office tower becoming available.
That pushed the Royal City’s office vacancy rate to 16.2% from 9.9% at the end of June.
Appia Developments’ 230,000-square-foot SOLO District Office tower in Burnaby is the largest office tower under construction in the suburbs and Colliers’ data shows that only 8.6% of that space is pre-leased. The project is set to be complete early in 2016.
Downtown Vancouver’s office vacancy continues to trend higher. It crept 0.2 percentage points higher to 6% at the end of September.
The 270,000-square-foot MNP Tower is likely the first of six major under-construction office projects to complete.
Dubuque said that he can watch construction from his office window and that even though Colliers projects that the site will complete next quarter, he thinks much of its leasable space will first be available in early 2015.
Work also continues on sites such as the:
• 450,000-square-foot Telus Garden;
• 365,000-square-foot 745 Thurlow Street;
• 250,000-square-foot Manulife building at 980 Howe Street;
• 400,000-square-foot Exchange at 475 Howe Street; and
• 280,000-square-foot office component of Pacific Centre at 725 Granville Street.
