Vacancy rates continue to tighten with the end of Q2 recording a 3.6% vacancy rate for Metro Vancouver, a decrease from the Q1 rate of 4.0%. Vancouver’s central business district (CBD) total vacancy rate dropped from 2.6% in Q1 to 2.5% in Q2 while awaiting the arrival of new supply to the market. Downtown Vancouver is expected to continue to experience low vacancies for the duration of 2019.
The second quarter ended with a positive absorption of 262,042 square feet. The suburban markets accounted for 92% of activity while the Downtown and Midtown submarkets accounted for 10% of positive absorption and 2% of negative absorption respectively.
Technology tenants continued to drive the demand for office space and represented 39.4% of total demand. Education tenants had the second highest demand at 15.4%, followed by Healthcare tenants at 8.1% of the total demand.
WeWork's latest transaction is a 54,300 square foot location at 1045 Howe Street – adding new desks and workspaces to its expanding Vancouver presence.
Although average asking net rental rates slid from $28.09 in Q1 2019 to $27.48 in Q2, they are significantly higher than Q2 2018’s $25.29 rate. The new office projects may provide some relief, but only if the space is leased to tenants who will leave space behind for backfill opportunities
The total office area under construction is 2.8 million square feet in the downtown market, with approximately 420,000 square feet expected to complete in 2020 and approximately 1,300,000 square feet in 2021.