Downtown Vancouver offices are looking a lot more like ghost towns than in years past.
A new report reveals the city’s downtown office vacancy rate climbed to 11.9 per cent in the third quarter of 2023 – the highest rate in nearly 20 years.
And the tumbleweeds aren’t contained only to downtown Vancouver.
The Sept. 28 report from commercial real estate firm Colliers also found the office vacancy rate across Metro Vancouver hit a six-year high during the third quarter.
The region’s office vacancy rate now stands at 8.6 per cent – up from 7.4 per cent in the second quarter of 2023.
“While the Greater Vancouver area has one of the highest return-to-office levels in Canada, many businesses continue to optimize their office space requirements to adapt to the growing prevalence of hybrid work arrangements and the changing nature of in-office work,” said the report.
Meanwhile, demand for healthcare-related space surpassed the tech sector this past quarter. The health-care sector sought more than 560,000 square feet of office space across Metro Vancouver in the third quarter.
More than 30 per cent of employees across Canada in industries such as government, professional services, finance and technology now work mostly at home, according to Labour Force Survey data Colliers cited in its report. This trend means less demand for office space, with the national office vacancy rate reaching 14.1 per cent as of the third quarter of 2023.
“Despite these obstacles, asking rents remain near record-high levels in many markets. This reflects the removal of aging buildings for redevelopment, landlords’ desire to negotiate other concessions beyond lower rent and the construction of new AAA-class offices,” the report said.
Despite office vacancies trending upwards in Metro Vancouver, prices remain firmly above national levels.
But the average asking rent per square foot in the region decreased slightly to $34.49 in the third quarter of 2023. This is higher than the national average of $21.08 per square foot and Victoria’s average of $22.79 per square foot.
Canada’s commercial real estate markets, meanwhile, are in some flux as companies adjust to hybrid work arrangements and a weakening job market. The national unemployment rate stood at 5.5 per cent in August, however the report said that job losses have been concentrated in areas tied to commercial real estate.
Construction is the No. 1 source of job losses followed by office tenants in the government and technology sectors, said the report.
As Metro Vancouver’s office market adjusts to shifting work preferences, the industrial real estate market is adjusting to a gradual decline in activity.
The region’s vacancy rate increased to 1.2 per cent this past quarter. This marks the first time in three years that the vacancy rate has exceeded one per cent.
In addition, sublease vacancy accounted for 38 per cent of all industrial vacancies, up from six per cent in the second quarter of 2023.
“Net absorption remained positive this quarter, even though vacancy increased, due to the delivery of substantially pre-leased new buildings. The completion of several industrial developments, including phase four of the Golden Ears business park, added 1,845,268 square feet of new inventory, indicating a continuing strong demand for newer properties with better specifications,” said the report.
Asking rent for industrial space decreased slightly to $21.84 per square foot this past quarter. However, average rent is up nearly eight per cent year-over-year, according to the report.