Surrey's office vacancy rate shot up to its highest point in nearly nine years at the end of 2013 and is poised to remain at uncommonly high levels throughout 2014, according to an Avison Young Metro Vancouver office market report released January 29.
At 17.3%, Surrey's office vacancy rate is 12.3% higher than second place Richmond, which has a 15.4% vacancy rate.
Fuelling the 5.8 percentage point rise in Surrey office vacancy since year-end 2012 was the highest level of negative annual absorption since Avison Young began tracking that sprawling suburb in 1997.
Negative absorption is vacated office space that is not re-leased.
"Substantial large blocks of space were given back to the market without any tenants to backfill that space," said Andrew Laurie, a senior associate who specializes in suburban office space at Cushman Wakefield.
The RCMP vacated 180,000 square feet of space in various Surrey locations to move to its new 819,800-square-foot E-Division headquarters on Green Timbers Way in Surrey last January.
Coast Mountain Bus Co. then vacated about 60,000 square feet at Station Tower to move into a new 225,000-square-foot TransLink headquarters in New Westminster that also includes TransLink's transit police and other staff.
Lingering vacancy also stems from Fraser Health Authority's 2012 amalgamation that moved Surrey staff to Burnaby.
"There's also a number of newly constructed properties that are vacant," Laurie said. "Phase 2 of Centre of Newton is a LEED platinum building sitting vacant after it was built on spec by Value Property Group."
But new absorption is likely to chip away at Surrey's office vacancy rate in 2015 and beyond, according to Josh Sookero, Avison Young's office division vice-president.
"The fundamentals of Surrey are strong. There's so much population growth and a strong housing market as well as buy-in for Surrey City Centre and its revitalization."
Sookero added that if mayor Dianne Watts gets her way and streetcar lines are built, the city will be even more desirable for office tenants.
"For success at leasing buildings, you have to have a good location for transit."
