Downtown Vancouver is experiencing the fastest rising cost of prime office leasing of any city in North America. In addition, the overall Greater Vancouver area vacancy rate fell to the lowest point since 2001, with 5 of the 7 sub-markets experiencing increasing leasing rates. Despite the 16.1% leasing rate increase Downtown, the $48/sf cost is still lower than the $56/sf average in Downtown Toronto. However this is still a bargain on an international basis where Midtown Manhattan leads the North American pack at $184/sf.
Given these facts, interest from both domestic and foreign buyers remains strong, particularly along suburban transit lines where investors are seeing higher returns than downtown due to lower costs of acquisition. However Downtown Vancouver remains the second tightest office market in North America due to a number of factors:
- Vacancy rates have dropped from 5.5% to 3.8% over the last year Downtown
- Construction activity has increased but additional floorspace is not expected until 2021
- Vancouver GDP growth is expected to remain at about 3% over the next year
- BC’s unemployment rate is expected to decrease to 4.8%, well below the national rate of 5.8%
Industrial and retail lease rates are also increasing in Vancouver with industrial up 12% year over year, and retail up 20% year over year. The Vancouver market is experiencing strong demand from the high tech sector, and this sector in particular sees the value of locating in the most desirable space, in order to attract top talent in this competitive environment. All of these things add up to the reality that the Greater Vancouver market remains a landlord’s market.
Written by Richard Johnson MCRP – former Urban Planner for the City of Vancouver.
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