A bumpy road for the office market is continuing
Office vacancy rates in Vancouver continued to rise in the second quarter of the year, with a substantial number of leases expiring without renewal across the downtown core, according to Avison Young.
The region’s overall office vacancy rate went up from 9.4% in Q1 to 10% in Q2, with head lease vacancy accounting for 76% of the total rise in the downtown area’s vacant space.
“This pattern was a result of occupiers waiting out their lease expiry before decommitting to office space,” Avison Young said.
The report outlined three reasons in particular that might have inflamed these developments.
“First, tenants with industry-specific space layouts may not have tried to sublease their space if they did not deem it in-demand,” Avison Young explained. “Second, there could have been restrictions from landlords on subleasing space. Third, a time lag from management may have existed as they needed to co-ordinate a strategy of office space pullback before acting.”
Avison Young is anticipating this trend to hold for the foreseeable future.
“More head lease premises will become vacant as the year and macroeconomic uncertainty progress,” the report said.
Still, other parts of the region might hold the fort over the next few quarters.
“While deal velocity in downtown remained limited, suburban markets took the reins as the primary node of market activity in Q2 2023,” Avison Young said.
Amidst ongoing discussions about remote & hybrid arrangements, it's crucial not to overlook the prospects of the #office market. Check out @CMPmagazine for more on the importance of quality spaces & their role in shaping the modern workplace: https://t.co/FI9WF2x1n5 #AYdifference
— Avison Young | Canada (@AY_Canada) June 13, 2023
The suburban market has also been supported by higher construction costs, which have led many tenants to renew their leases and recommit to their office footprints.
“In total, suburban markets recorded approximately 29,500 sf of positive three-month absorption at the end of June,” Avison Young said.
