First quarter of 2009 sees decline in B.C. resource sector, Olympic capital spending dwindles
Derrick Penner
Sun
With British Columbia‘s resource sector in decline and capital spending related to the 2010 Olympics dwindling, Metro Vancouver’s office vacancy rate began to rise in the first quarter of this year, a major commercial realtor reported Thursday.
CB Richard Ellis Canada, in its latest office report, calculated that office vacancies across Metro Vancouver rose to 7.3 per cent in the first quarter of 2009 from six per cent at the same point in 2008.
Downtown Vancouver‘s notoriously tight vacancy rate, which approached rates of 2.3 per cent in the third quarter of 2008, has crept up to 4.2 per cent.
However, CB Richard Ellis senior analyst Nicholas Westlake, in an interview, said the amount of additional office space downtown tenants hold, but are willing to turn over into subleases is the more important statistic.
Westlake said downtown’s 4.2-per-cent vacancy comprises 427,000 square feet of vacant offices. However, tenants are actively marketing another almost 400,000 square feet of space they could give up on short notice to subleases, which brings overall downtown office availability closer to 6.5 per cent.
“The big thing here right now is there is a big discrepancy between what the vacancy rate is and what the availability rate is,” Westlake said. “The availability rate is the telling story on where the market is at right now.”
The space available for sublease represents companies that are downsizing, or firms that leased more space than they needed — in anticipation they would expand — during Vancouver‘s boom period, when office vacancies were shrinking.
Now, the need to expand is no longer pressing. Companies ranging from forestry firms to mining companies and tech firms, such as Electronic Arts, have downsized and made office space available downtown.
“Historically, we haven’t calculated [an availability rate],” Westlake said. “It’s only [a significant statistic] in a recessionary period.”
Nationally, CB Richard Ellis reported that challenging economic conditions in manufacturing, retail and resource sectors piled on top of constraints on credit to push businesses out of an increasing amount of office and commercial spaces.
CB Richard Ellis said commercial vacancies in the urban and suburban markets it measures across the country rose to 7.5 per cent in the first quarter of 2009 from six per cent a year ago.
A year ago in the first quarter, commercial tenants absorbed 2.6 million square feet of new space.
This year, commercial tenants turned just over two million square feet of commercial space back into the market.
“The residual effects of the Canadian economic downturn continued to impact the first quarter commercial real estate market conditions,” John O’Bryan, CB Richard Ellis’s vice-chairman, said in a press release, which is “a trend we expect to continue for the balance of 2009 — while more news regarding the slowing Canadian economy continues to surface.”
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