Vacancy rate of 2.06 per cent to drop to 0.3 per cent by 2010, real estate firm says
Derrick Penner
Sun
With downtown Vancouver’s office-vacancy rate at a record low and set to ratchet down even further, at least one commercial realtor is musing about how pressure on the market will be relieved.
Barclay Street Real Estate’s second-quarter report counts just 400,000 square feet of vacant space of the 19.4-million square feet of space that it tracks in downtown buildings, a mere 2.06-per-cent vacancy rate.
Although leasing activity has slowed, the firm expects tenants to take up another 184,000 square feet of that space by the end of 2008, leaving vacancy at just 1.1 per cent, a level it expects to hold through 2009 then possibly even drop to 0.3 per cent in 2010.
“Office leasing in Vancouver continues to confound and amaze us,” the report said.
Other Vancouver-based commercial realtors, however, have estimated the downtown office market to already be in a tighter spot. Colliers International, tracking a larger area of the downtown peninsula, puts vacancy at 1.7 per cent.
And in Barclay Street‘s assessment, “[The] downtown Vancouver market is falling into an interesting trap,” with not enough space to meet the demand of typical downtown tenants — smaller professional firms — but too few big head-office tenants to underwrite the construction of new buildings.
The Barclay Street report said leasing activity in downtown has slowed, largely because brokers can’t find spaces in the 2,000-5,000-square-foot range for those “bread and butter” clients.
And there is little new office space being built, with plans for at least one prospective tower put on hold — the Aquilini Investment Group/Tripower Development proposal for a 24-storey, 236,000-square-foot building, including 197,000 square feet of office space.
“We are watching with interest to see how the market corrects,” the Barclay Street report states.
The possibilities range from an economic downturn that could force vacancies, to tenants leaving offices downtown for the growing number of office-park projects being built on spec in suburbs like Burnaby and Richmond.
Last week, The Vancouver Sun reported on the office construction picture, with 477,020 square feet of office space currently being built in Burnaby, and another 1.5 million-to-1.8 million in the planning stages, compared with just 185,500 square feet under construction downtown, according to commercial realtor Avison Young.
That being said, Colliers’ second-quarter report noted that the 500,000 square feet of new office space completed across Metro Vancouver in 2007 represented an all-time low.
There are proposals on the books to build about 1.2 million square feet of offices downtown, but those include the Aquilini/Tripower proposal that is on hold, as well as a plan by B.C. Investment Management Corp. and Bentall Real Estate that isn’t even at the pre-leasing stage.
“Downtown tenants need buildings, and suburban developers need tenants,” the Barclay Street report said. “We may start to see them get together more often.”
The remaining question, Barclay Street said in the report, is whether “vacancy [will] keep tightening down and rents keep rising until one of the large downtown tenants needs more space and has no choice but to pre-lease a new project.”
© The Vancouver Sun 2008
