Vancouver’s Downtown Markets Strengthen Despite Climbing Regional Vacancy
August 5, 2010
Fueled by renewed interest in downtown office space, Metro Vancouver’s office market remains steady leading into the latter half of 2010, according to DTZ Barnicke Vancouver Limited’s second-quarter Metro Vancouver Office Report.
“Limited options and limited new supply are keeping the downtown office market very tight,” says Jason Marriott, office leasing specialist with DTZ Barnicke Vancouver. “Demand for downtown commercial property has really taken off since the beginning of the year, and we are seeing fewer companies down-sizing and putting sublease space on the market.”
Vacancy for downtown space totaled 1,141,646 square feet, representing 5.6 per cent of the total downtown inventory. This was a slight increase from the last quarter, which sat at 5.5 per cent and 1,116,752 square feet of vacant space. Overall, however, downtown space has outpaced that of suburban markets, which continue to exhibit weaker fundamentals.
“In suburban office markets, we are seeing high vacancies which are a result of new supply and insufficient demand occurring at the same time,” says Marriott. “New office projects are just finishing and are coming on stream this quarter adding to the total amount of vacant space.”
The total regional vacancy remained unchanged from last quarter to sit at 9.6 per cent but is still higher than the seven per cent registered the same time a year ago. The suburban vacancy rate reached 15 per cent, a jump from the 13 per cent registered last quarter and the 11.4 per cent registered at mid-year 2009. Overall, the regional vacancy rate continues to climb, due primarily to large blocks of space available in the suburban markets. Burnaby, Surrey and Richmond alone account for over 53 per cent of the total vacant supply in the region.
With suburban demand expected to stagnate over the short term, the region’s strength will be in the downtown office market where confidence remains high. However, with little new supply entering the market over the next several quarters and limited existing options, prospective tenants may once again return to peripheral markets where competitive lease rates and space options are plenty.
“As the market tightens downtown, we may eventually see more tenants looking again to the suburbs,” says Conor Finucane, Commercial Specialist at DTZ Barnicke Vancouver. “Quality product options, especially for large [15,000 square feet and above] users are pretty hard to find in the central core. This may slowly drive up demand for suburban office space in the medium term.”
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