Metro Vancouver office market report

Metro Vancouver office market fundamentals

01. Vacancy edged up slightly while new supply completed led to overall positive absorption

Metro Vancouver’s vacancy rate continued its upward trajectory in Q2 2024, increasing 30 basis points quarter-over-quarter to 10.4%. The Downtown vacancy rate rose slightly from 12.5% to 12.8% quarter-over-quarter, as the last of the significant new supply in the Downtown market was delivered with the completion of B6, which accounted for the majority of the positive absorption in the class AAA market this quarter.

Despite the ongoing increase in vacancy, it is expected to plateau. For any significant tenant growth in the Downtown market, there are limited options available. The market has seen several tenants outgrow their shared office space and take on larger spaces directly, including some notable tech companies.

02. New development slowing with several developers pausing to reevaluate plans

Metro Vancouver is experiencing a slowdown in new development projects, potentially impacting future availability of premium space. Several developers have delayed construction start dates in hopes of future construction cost stabilizations, and a change in the City of Vancouver view cone policy.

3.7 million sf of new office supply is expected to be added to the market in the next three years, the majority of which will be located in the suburbs. Larger Downtown office deliveries over 100,000 sf are now complete, and the premium view space has been leased. The scarcity of new supply opportunities for class AAA space coming to the market may pose a challenge for tenants looking to expand or upgrade into premium space.

03. Construction cost escalations are guiding tenants towards turnkey opportunities

With coWith the ongoing increase in vacancy, landlords in the Metro Vancouver market continue to offer significant incentives and free rent, especially for renewals of dated office space.

Tenants are looking for turnkey spaces as construction costs remain high. As improved premises rent quicker than shell or unimproved spaces, many landlords have opted to build out office suites as part of their early marketing strategies to further attract tenants. Improved sublet spaces in quality buildings continue to be in demand while older spaces have a hard time attracting subtenants.