In its new Real Estate Market Study, Newmark Knight Frank Devencore reported that vacancy rates in downtown Vancouver are now among the lowest in Canada. Combined Class “A” and Class “B” vacancy rates stood at 3.5 per cent in mid-2011, down from 4.2 per cent at the end of 2010, representing the positive absorption of just over 150,000 square feet. The Class “A” submarket is especially tight, with an overall vacancy rate of only 2.9 per cent. Just over 375,000 square feet of Class “A” space is available for lease or sublet, most of this in smaller blocks.
“Downtown vacancy rates are now returning to the record low levels we saw prior to the financial crisis in 2008-09,” said Jon Bishop, vice president and managing principal of Devencore Company Limited. “With the tightness of supply, we expect that average asking rental rates, already among the highest in the country, will soon eclipse those achieved during the market peak of early 2008.”
Bishop added that the downtown office market will be landlord-favoured market over the short term, but that the considerable developer activity currently taking place will soon begin to shift the dynamics of the downtown market.
“No fewer than three major LEED office tower projects have been confirmed,” Bishop said. “Collectively, these developments will bring nearly 1.2 million square feet of prestige space to the market. The promise of this new premium view space in the downtown area may soon begin to have an influence on the real estate decisions of some larger tenants.”
Over the short term tenant opportunities will continue to be more plentiful in Metro Vancouver’s suburban areas. Leasing activity in these submarkets has also picked up in recent months, with local businesses driving most of the space absorption that is taking place.
Across the rest of Canada, corporate real estate markets have remained relatively healthy in 2011. The overall vacancy rate in Class “A” and Class “B” office buildings in Canada’s major cities dropped from 6.8 per cent to 5.4 per cent over the first half of the year, and total vacant space fell from 14 million square feet to just over 11 million square feet.