New building projects in Metro Vancouver are moving the needle when it comes to first quarter office and industrial vacancy rates.
The region’s office market remained “relatively” stable in the first quarter of 2024 with a vacancy rate of 10.1 per cent, according to data from commercial real estate firm Cushman and Wakefield.
However, downtown Vancouver’s office market vacancy reached 14 per cent in the first quarter of the year, suggesting a “tenant’s market,” said research manager Svetlana Lebedeva in an email to Glacier Media.
A balanced market is typically viewed as having a vacancy rate of between six and 10 per cent.
“This 30-year high vacancy, with the last peak in 2003, has been continuously fuelled by recent new construction completions and an increase of sublease space in recent months,” she said.
“Currently, there are just over 70 full vacant floors in the downtown core available for lease on a direct basis. This includes properties like 601 West Hastings St. with smaller floor plates and 1090 West Pender St., which is not yet part of the statistical inventory and thus excluded from the vacancy rates in [the first quarter].”
The office market is not the only commercial real estate asset class to see its vacancy rate influenced by new construction. Industrial vacancy increased to 2.5 per cent and while low, “it is the highest rate reported since the third quarter of 2018,” said Lebedeva.
“This increase in vacancy was mostly fuelled by new construction completions, especially in the Fraser Valley,” she said.
More specifically, 257,000 square feet was added to the inventory in Abbotsford that is fully vacant, and 348,000 square feet was added to the inventory in Surrey, with 186,000 square feet vacant.
“A total of 1.4 mllion square feet was added to the inventory upon completion in Metro Vancouver. However, only 55 per cent of this space was pre-leased [or] pre-sold, leaving 639,000 square feet added as vacant. This is the lowest quarterly new supply total in the last five quarters,” said Lebedeva.
When it comes to projects in the pipeline, there is roughly 7.4 million square feet under construction with 60 per cent of the space pre-leased or pre-sold. In addition, the majority of these projects are speculative builds, according to Lebedeva.
This construction is in addition to another 22 million square feet of proposed projects, with roughly 15 million square feet of these projects scheduled for completion between 2024 and 2026.
Vancouver has the highest amount of industrial vacant sublet space in the region at 222,000 square feet, followed by Delta at 172,000 square feet, Surrey at 164,000 square feet and Langley at 158,000 square feet.
“Within the region, there are 22 available spaces over 100,000 square feet, including sublease and headlease, and 13 vacant options over 100,000 square feet [of] sublease and headlease,” said Lebedeva.
