Opinion: Vancouver’s low office vacancy rate disguises empty offices

Darrell Hurst
Western Investor

While the downtown office vacancy rate is sub-10 per cent, up to 50 per cent of tower space is empty as employees continue to work from home

One of the more interesting data points in the unfolding return-to-work phenomenon has been how well British Columbia has performed compared to other parts of Canada. According to Colliers Research, return to work levels for Vancouver overall remain above the country-wide average and have been so for the last two years. This data goes beyond return to office specifically, as it includes all types of work including retail, education, tourism and restaurants. But what is also striking to note is that return to work levels in downtown Vancouver are up 40 per cent from September 2020. And mid-August return to work levels were above mid-April levels, despite summer usually being slower. 

 We know some of the reasons why Vancouver has done so well: Vancouver benefits from a more favorable year round climate and a more robust outdoor economy and lifestyle than in other parts of Canada and so we were less affected by the impacts of COVID-19 than other major markets; Vancouver is also less dependent on transit than say Toronto and thus, we have a greater reliance on private transit which has encouraged more people to drive to work; Vancouver, and B.C. generally, had less depth and duration of restrictions. But despite all of this, the return to office experience is obviously different industry to industry and business to business. 

 What we saw at the start of the pandemic was that the early adopters of work from home policies were primarily anchored in the tech sector. They were also the ones to return to the office more quickly, with in many cases, additional staff, increased office footprints and overall square footage. However, most companies and organizations are still trying to figure out their hybrid and flexible workplace strategies, and that includes re-evaluating their long-term office needs. This predicament is not unique to the tech sector, and the realization, for some, is that they may never return to pre-Covid occupancy levels. This has led to an increased amount of office space being put onto the sub-lease market. 

 Vancouver’s office sector is facing several significant challenges. According to a recent poll conducted by Colliers among several major landlord clients to gauge how they were faring with their tenancies and return to office, what we found was surprisingly low occupancy rates.

Most major landlords in downtown Vancouver are reporting 25 per cent to 50 per cent occupancy levels in an office market with a relatively healthy vacancy rate when compared to other major office markets in North America. Many of the same landlords, who are national in scope with major office holdings in Toronto, are reporting much lower occupancy levels in their downtown office portfolios.

In addition, the amount of sub-lease space that’s been added to the downtown Vancouver office market in just the last few months is similar to what was witnessed at the early stages of the pandemic. The eventual outcome is the likely downward pressure on rental rates across many building classifications, coupled with more opportunities for those tenants used to evaluating fewer availabilities in a much more competitive leasing environment. 

While buildings are seldom ever 100 per cent occupied, these new lower occupancy levels represent a trend that are now having a ripple effect on other sectors, including transportation, retail and the hospitality sectors. Those sectors have and will continue to struggle with reduced pedestrian presence, which has in turn impacted the safety and security of the downtown core.

 Even though Vancouver office space continues to retain and attract tenants, there are signs of headwinds to come in certain building classifications, such as Class B and C office space, including non-view space or poorly improved space, which has become much harder to lease and with elevated levels of competition. An increase in downtown sub-leases means more leased space is being placed onto the market, now accounting for more than a quarter of the vacant office space in the core. 

 However, unlike other major markets including Toronto, New York and San Francisco, Vancouver has proven in past down cycles – like the financial crisis of 2008-09 – to be resilient. With increased immigration, a strong talent pool and our low dollar, Vancouver continues to attract more than its share of larger firms. In addition, even while companies look to retain and expand flexible workplace strategies, they continue to need space for collaboration and connection among employees, paving the way for ongoing demand.

• Darrell Hurst is the senior managing director for Colliers, Vancouver. 

© 2022 Western Investor

Parksville 24,209-sq.-ft medical centre sells for $4.5 million

William Wright Commercial
Western Investor

The Vancouver Island office-retail complex includes two buildings, 10 tenants including Shopper’s Drug Mart and professionals, and a 65-stall parking lot in downtown Parksville.

Property type: Office-retail

Location: 154 Memorial Avenue, Parksville, B.C.

Number of tenants: 10

Number of buildings: 2

Property size: 24,209 square feet (approx.)

Sale price: $4.5 million

Brokerage: William Wright Commercial, Vancouver

Broker: Cory Wright , William Wright Commercial; John Hankins, NAI Commercial, Nanaimo, B.C.  (seller’s agent.)

© 2022 Western Investor

Inflation, interest rates create caution in Metro Vancouver’s housing market

REBGV Staff
REBGV

Home sale activity across the Metro Vancouver* housing market continued to trend well below historical averages in October.
The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 1,903 in October 2022, a 45.5 per cent decrease from the 3,494 sales recorded in October 2021, and a 12.8 per cent increase from the 1,687 homes sold in September 2022.
Last month’s sales were 33.3 per cent below the 10-year October sales average.
“Inflation and rising interest rates continue to dominate headlines, leading many buyers and sellers to assess how these factors impact their housing options,” Andrew Lis, REBGV’s director, economics and data analytics said. “With sales remaining near historic lows, the number of active listings continues to inch upward, causing home prices to recede from the record highs set in the spring of 2022.”
There were 4,033 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in October 2022. This represents a 0.4 per cent decrease compared to the 4,049 homes listed in October 2021 and a 4.6 per cent decrease compared to September 2022 when 4,229 homes were listed.
The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 9,852, a 22.6 per cent increase compared to October 2021 (8,034) and a 1.2 per cent decrease compared to September 2022 (9,971).
“Recent years have been characterized by a frenetic pace of sales amplified by scarce listings on the market to choose from. Today’s market cycle is a marked departure, with a slower pace of sales and more selection to choose from,” Lis said. “This environment provides buyers and sellers more time to conduct home inspections, strata minute reviews, and other due diligence. With the possibly of yet another rate hike by the Bank of Canada this December, it has become even more important to secure financing as early in the process as possible.”
For all property types, the sales-to-active listings ratio for October 2022 is 19.3 per cent. By property type, the ratio is 14.3 per cent for detached homes, 21.6 per cent for townhomes, and 23.2 per cent for apartments.
Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.
The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,148,900. This represents a 2.1 per cent increase from October 2021, a 9.2 per cent decrease over the last six months, and a 0.6 per cent decrease compared to September 2022.
Sales of detached homes in October 2022 reached 575, a 47.2 per cent decrease from the 1,090 detached sales recorded in October 2021. The benchmark price for a detached home is $1,892,100. This represents a 1.6 per cent increase from October 2021 and a 0.7 per cent decrease compared to September 2022.
Sales of apartment homes reached 995 in October 2022, a 44.8 per cent decrease compared to the 1,801 sales in October 2021. The benchmark price of an apartment home is $727,100. This represents a 5.1 per cent increase from October 2021 and a 0.2 per cent decrease compared to September 2022.
Attached home sales in October 2022 totalled 333, a 44.8 per cent decrease compared to the 603 sales in October 2021. The benchmark price of an attached unit is $1,043,600. This represents a 7.1 per cent increase from October 2021 and a 0.5 per cent decrease compared to September 2022.


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Metro home sales, prices in a six-month downward spiral

Western Investor staff
Western Investor

October transactions down 45.5 per cent from a year earlier as Greater Vancouver housing prices continue to slip lower month-to-month

 Benchmark home price has fallen 9.2 per cent in six months. | Western Investor

A month-over-month sales rally in Greater Vancouver’s housing market failed to mask a six-month downward spiral that saw October transactions fall to near historic lows and benchmark prices drop by 9.2 per cent compared to May of this year.

Total October sales, at 1,903, were up 12.8 per cent from a month earlier as buyers tried to get in before a late-October interest rate hike, the sixth in nine months.

Right on cue, the Bank of Canada raised the overnight lending rate by 50 basis points on Oct. 26, pushing the prime rate to 3.75 per cent.  This drove typical five-year mortgage rates above 5.5 per cent, a 100 per cent increase compared to the start of this year.

The Real Estate Board of Greater Vancouver (REBGV) reports that October residential home sales were down 45.5 per cent compared to October 2021, but up 12.8 per cent from the 1,687 homes sold in September 2022.

October sales were 33.3 per cent below the 10-year October sales average.

 “Inflation and rising interest rates continue to dominate headlines, leading many buyers and sellers to assess how these factors impact their housing options,” said Andrew Lis, REBGV’s director, economics and data analytics. “With sales remaining near historic lows, the number of active listings continues to inch upward, causing home prices to recede from the record highs set in the spring of 2022.”

There were 4,033 new listings for detached, attached and apartment properties on the Multiple Listing Service (MLS) in Metro Vancouver in October 2022. This represents a 4.6 per cent decrease compared to September 2022.

In total, 9,852 homes are for sale across Greater Vancouver, a 22.6 per cent increase compared to the end of October 2021 and a 1.2 per cent decrease from September 2022. Less than one in five (19.3 per cent) of listed homes sold during this October, and the sales-to-listing ratio dropped to 14.3 per cent for detached houses, according to REBGV data.

The composite benchmark price for all residential properties is currently $1,148,900. This represents a 2.1 per cent increase from October 2021, but a 9.2 per cent decrease over the last six months.

Sales of detached houses, with 575 transactions in October, were down 47.2 per cent from October of last year and 10 per cent lower than six months earlier. With a current benchmark price of a $1.89 million, the typical detached house has shed about $180,000 in value since May of 2022.

Townhouse sales in October totalled 333, down 44.8 per cent from October 2021, while the benchmark price dipped 0.5 per cent from September 2022, to $1.04 million.

Sales of condo apartments reached 995 in October 2022, a 44.8 per cent decrease compared to the 1,801 sales in October 2021. The benchmark price of an apartment home is now $727,100. This represents a 5.1 per cent increase from October 2021 but a 6.3 per cent price decline from six months earlier. Currently, the sales-to-listing ratio for strata homes is averaging around 21 per cent. 

© 2022 Western Investor