Metro Vancouver office market report

Metro Vancouver office market fundamentals

01. Tenants clearly prefer newly-built class AAA buildings

From Q4 2021 to Q4 2024, Metro Vancouver’s class AAA inventory increased by more than 3.2 msf. Despite the sharp rise in inventory over that period, the vacancy rate for newly-built buildings decreased from 13.6% to 9.7%. Conversely, the vacancy rate for older-built class AAA space, increased from 3.0% to 7.1% over the same period.

With a lack of incoming class AAA developments currently under construction, the observed flight-to-quality trend is more than likely to continue in the upcoming quarters as tenants continue to choose newly-built buildings with premium spaces over older-built buildings. Landlords recognize the need to invest to enhance tenant experiences to remain competitive. 

02. AI’s potential impact on office space 

Artificial Intelligence (AI) has recently gained significant attention as new tools and applications become more accessible and valuable to businesses. 

Some companies are assessing AI’s potential impact on their operations and future space needs. While some roles may be replaced by AI tools, reducing the required footprint for certain teams, businesses might equally expand their operations as an increase in overall productivity fuels growth. 

Additionally, as AI-focused companies continue to emerge, their demand for space in the market is likely to rise.

03. Landlords and tenants continue to choose show suites

In Q4 2024, Metro Vancouver’s gross occupancy costs declined to $54.96 per square foot (psf), down from $56.57 psf in Q4 2023, reflecting a 3.0% year-over-year decrease. The vacancy rate has remained near record highs over the past year, reaching 11.1% in Q4 2024.

To navigate fluctuations in occupancy costs and vacancy rates, landlords continue to offer incentives to attract tenants. Among these, show suites continue to be popular. With construction costs remaining high, show suites provide a more cost-effective alternative to custom-built spaces.

Tenants appreciate show suites and turnkey opportunities for their minimal lead time and reduced risks compared to traditional build-outs or tenant improvement (TI) allowances.