This article originally appeared on the Vancouver Sun website.
Downtown Vancouver office vacancy rate exceeds level of 2008 financial crisis
"Companies aren't abandoning their office premises, but where there's an opportunity to slim down, and make do with less, that's where we're at," said Ross Moore of Cresa.
Publishing date:Apr 08, 2021
Downtown Vancouver’s office vacancy rate is currently at 6.7 per cent, putting it above the peak levels that followed the global financial crisis in 2008 when many companies let go of their prime office space.
To compare, in the first quarter of 2020 a year ago, the rate was 3.1 per cent.
There have been other steep increases in vacancy rates, according to Ross Moore, a managing broker at real estate company Cresa, but that was because new buildings were coming onto the market, such as in 2015 when the addition of Telus Garden, 745 Thurlow, MNP Tower and others pushed the vacancy rate up to 9.6 per cent.
There are 13 office buildings currently under construction in downtown Vancouver. With those additions, the vacancy rate could climb to 18.3 per cent, “which is a whole lot more sobering,” said Moore.
Optimism about the vaccine rollout has given hope to office life resuming, but there are also fresh concerns about faster-spreading COVID-19 variants and a return to more working from home.
“My sense is that companies are looking through the recent rise in variants and lockdowns. Certainly, every office tenant I’m working with at the moment is staying the course,” said Moore. “All are assuming a hybrid model.”
Companies are trying to determine the amount of office space needed to weather what will be a blend of working remotely and in-person.
Nearly half of all office vacancies across Metro Vancouver are located downtown, according to a new report by commercial real estate firm CBRE, which stated that “many tenants continue to take a wait-and-see approach before determining their new modern office requirements.”
“It’s primarily B and C class buildings and spaces less than 6,000-square-feet that are seeing vacancies,” said Vancouver-based CBRE managing director Jason Kiselbach.
“We entered last year with the most under-construction office space in downtown Vancouver in the history of the city,” said Kiselbach. “There is actually still a shortage of supply of vacancy in the triple A (newer, more expensive and prime location) building space as well as in larger blocks of space.”
He said that over 60 per cent of this under-construction space has been pre-leased by major companies.
The CBRE report noted in downtown Toronto, office vacancy hit 9.1 per cent in the first quarter, which is the highest level since early 2008.
“The macro trends impacting Toronto are also true here, but the tenant make-up (and size) are quite different,” Moore said. “We have few large corporate users, unlike Toronto, not as many government, and quasi government agencies, a higher concentration of junior resource companies, and while we both have a high number of tech tenants, ours tend to be smaller and don’t have larger footprint that allow for ‘rightsizing’ … (such as) accepting you might not need that second location or a second floor.
“I think a fair summary would be companies aren’t abandoning their office premises, but where there’s an opportunity to slim down, and make do with less, that’s where we’re at.”