Report shows current demand being driven by niche market of tenants seeking smaller, unique spaces
July 15, 2014 (Vancouver, BC)
Colliers International announced today the findings from their Metro Vancouver Office Market Report, looking at the second quarter of 2014. Of the report’s major findings, vacancy rates continued to climb, hitting an all time high in Metro Vancouver since 2005 – rising above 9% to 9.3% in Q2 of 2014, up from 8.7% in Q1.
According to the report, current vacancies are due in combination to a general lack of demand for office space across larger more traditional industries, as most have already completed their lease deals, and an increase in office inventory in cities such as Burnaby and Surrey. Additionally, tenants that are in the market are using a ‘wait and see’ approach to determine how landlords react to a substantial increase in inventory.
Colliers’ Metro Vancouver Office Market Report also found that most of the existing demand is being driven by the technology & digital media industries searching for a specific type of product that is currently in narrow supply in Vancouver – smaller, unique spaces offering 5,000 square feet or less. With this new trend emerging, questions are being raised surrounding what will happen to the over one million square feet of office space being left behind by tenants moving to the buildings under construction.
Maury Dubuque, Managing Director for Colliers Vancouver shares, “The type of tenants currently in the market for office space are looking for a combination of value, unique space and a great location. Technology tenants tend to prefer office space within heritage buildings found in locations like Gastown, Railtown and Yaletown that offer a distinctive ‘retro’ feel, or, new modern buildings with large floor plates that are located close to amenities and accessible by rapid transit. This is why we’re seeing more traditional types of space, like that within the Downtown Core, suffer from modest demand and rising vacancy.”
With tenants seeking smaller spaces, Colliers predicts vacancy will continue to increase as the new supply of office space hits the market; however, vacancy will shift to existing office buildings as new product under construction have already secured a significant amount of pre-leasing. Colliers expects that there will be a flight to value for office tenants as the new buildings can offer more efficient and technologically advanced space; as such, Colliers expects that existing Class A and Class B buildings will see the largest increases in vacancy, which could potentially lead to notable rental rate compression.
The Colliers International Metro Vancouver Office Market Report provides a breakdown analysis across Metro Vancouver's sub-markets, including the North Shore, Burnaby, New Westminster, Richmond, Surrey and Langley.
> Download full report in the Market Insights section