Metro Vancouver's office vacancy rate continues to climb, but a development drought suggests this trend will level off.
The vacancy rate rose to 10.4 per cent in Q2 2024, a slight increase of 0.3 per cent from the last quarter, according to a Aug. 14 report from real estate services firm Avison Young ÎÚÑ»´«Ã½.
Downtown vacancy rates jumped from 12.5 per cent to 12.8 per cent quarter over quarter, a direct result of significant new supply from the completion of a 32-storey 534,000-square-foot office tower on West Pender Street known as B6.
Other large downtown spaces over 100,000 square feet have also hit the market, increasing availability from 7.8 million square feet last quarter to 8.2 million square feet during the most recent quarter.
This places the average rent per-square-foot at $56.12, said the report.
Around 3.7-million-square-feet from 32 office projects is expected to increase market supply in the next three years, located mostly in suburban areas.
Metro Vancouver’s availability rate also increased from around 13 per cent to 14.2 per cent year over year, or an increase of 0.6 per cent since Q1 2024.
However, for Class AAA office spaces, availability decreased from 15.1 per cent to 13.3 per cent quarter over quarter.
This upward trend in vacancy is leading landlords to offer incentives and free rent for tenants of older office spaces to retain them, as occupants look for further options in turnkey spaces in a market where construction costs are high, according to the report.
These are fully renovated spaces easier to purchase or rent, avoiding construction costs, according to the report.
However, vacancy is expected to stabilize due to a lack of new developments and limited options available for any significant tenant growth, as companies continue to outgrow shared office spaces, according to the report.
Avison Young concluded developers are slowing down, waiting for construction costs to stabilize and an ease on the city’s view-cone policy – a protection guideline to ensure water and mountain views are not obstructed by high-rise buildings.
