Competition for Top-Tier Space Intensifies
VANCOUVER – In its Real Estate Market Research study published today, Devencore reported that locating top-tier office space in downtown Vancouver is becoming a significant challenge for tenants. Vacancy rates for all office classes have plummeted to 5.0%, down from 7.1% a year ago. Class A office vacancy rates are even lower, at 4.0%. At the same time, average gross rents are climbing steadily.
“The next development cycle is underway, but there won’t be any major new office buildings delivered to the market until 2021,” said Jon Bishop, Executive Vice-President and Managing Principal of Devencore’s Vancouver office. “As a result, it’s going to be increasingly challenging for tenants to locate Class A space in downtown Vancouver over the next three years. Securing leases on larger contiguous blocks of space will be especially difficult.”
As a result of demand outpacing supply for quality space in downtown Vancouver, competition for the space that is available is heating up.
“As vacancy rates continue to fall, it's not unusual to see multiple offers on top-tier spaces,” Mr. Bishop said. “There is some sublease space available at the moment, but this likely won’t remain on the market for very long.”
The interest in strata space isn’t showing any signs of easing, despite selling prices that have gone as high as $2000/sf. A number of new developments are under construction, and they are rapidly being bought up. Some real estate analysts have begun to question whether the market can realistically support the stratospheric prices.
“The space shortage is encouraging some tenants to renew their leases up to two years before they expire,” Mr. Bishop said. “And while it’s good news that a new development cycle is underway, tenants have to understand that it will be a few years before any new space comes to the market, and by the time this new space is delivered it may not be sufficient to meet the pent-up demand. There is a much better range of leasing opportunities in the submarkets outside downtown Vancouver for tenants willing to locate to the suburbs, and some space users may want to look at strata. In any event, it’s very important to be prepared to seize opportunities as they arise.”
To read the complete market study, please go to: http://devencore.com/market_information_detail.php?id=45
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