Metro Vancouver office market report

Metro Vancouver office market fundamentals

01. Nearly all submarkets show increased vacancy

The Metro Vancouver vacancy rate rose by 60 basis points (bps) quarter-over-quarter, reaching 11.0% in Q3 2024. While it has stayed relatively stable over the past year, around the 10% range, nearly all submarkets saw negative absorption, except Broadway, which remained fairly flat with 8,423 sf of quarterly absorption.

The Downtown vacancy rate rose by 80 bps quarter-over-quarter to 13.6%, a shift largely anticipated due to two major tenants releasing space: Microsoft placed 61,884 sf on the sublease market at 1090 West Pender Street (B6), and WeWork vacated 68,785 square feet at 595 Burrard Street (B3). However, there continues to be increased demand for class AAA and A buildings as the trend toward high-quality office space continues.

02. No new major downtown developments, conversions starting

With nearly 3.4 msf of new office space added to the Metro Vancouver market in the past three years, the development pipeline has slowed, with only three major projects (each over 200,000 square feet of office space) currently under construction.

While other Canadian cities have faced rising office vacancy rates and started repurposing underutilized office buildings, Vancouver has not followed this trend. However, two office buildings have now been officially removed from the inventory, as both are undergoing conversion into hotels: 576 Seymour Street, a heritage property that will retain its façade, and 225 Smithe Street, a newer mixed-use building. Tenants vacated 576 Seymour several quarters ago, while 225 Smithe, completed three years ago, has remained vacant since its delivery.

03. Office investment on the rise as confidence ensues amongst investors

Despite rising vacancy rates, the office market recorded several large sales transactions in recent quarters, including prominent towers in the Downtown area. While 2023 was a slow year for office sales, with only 14 transactions over $5 million, the first half of 2024 saw 16 sales totaling nearly $700 million. Although some of these were partial interest transfers, the activity indicated renewed confidence in the office market and provided private buyers an opportunity to acquire premium assets from institutional investors looking to reduce or exit their office holdings.

With the fourth consecutive Bank of Canada interest rate cut of 50 bps to 3.75% on October 23, 2024, office investment is expected to increase as capital becomes more accessible. This trend is also reflected in strata sales, where transaction volume nearly doubled in H1 2024 compared to H2 2023.