The market is seeing more unoccupied newly delivered space along with a growing number of subleases
The Metro Vancouver office market saw a “turbulent” start to 2023, although opportunities remain for occupiers who are seeking high-quality spaces, according to Avison Young.
The combination of unoccupied, newly delivered space and a growing number of subleases pushed Metro Vancouver’s vacancy rate to 9.3% during the first quarter of the year.
Greater dynamism in the downtown saw the area’s office vacancy rate go up from 9.6% in Q4 2022 to 10.8% in Q1 2023, Avison Young said.
“This movement was largely a result of accelerating sublease availability and new class AAA supply being delivered without full prelease commitments,” Avison Young said in its latest market report. “Technology firms felt the greatest pressure to sublease both due to their increased workforce mobility relative to more traditional office-based industries, and an attempt to cut expenses.”
During the first quarter, deal velocity across Metro Vancouver remained “constrained” mainly due to higher debt costs and the ongoing shift brought about by the remote working revolution.
“As a result, all submarkets other than downtown saw negative absorption during the first quarter of 2023,” Avison Young said. “The highest level of negative three-month absorption was found in Surrey at -52,615 square feet.”
Sublease availability also remained at a high level “as occupiers continued to reevaluate their office space requirements,” Avison Young said. Sublease availability went up to 29% of total vacancy throughout Metro Vancouver in Q1 2023.
“Technology firms felt the greatest pressure to sublease – both due to their increased workforce mobility relative to more traditional office-based industries, and an attempt to cut expenses,” Avison Young said. “This was after a year of unfavourable stock market readjustments and sector-wide over-investment in human capital. These spaces represent a good opportunity for occupiers looking for built-out space and attain greater demand relative to shell space.”