Vancouver’s office construction sector setting a torrid pace

Towering intensity

Vancouver office construction ranks among the most intense in North America, according to a new Colliers International report.

On the one hand, the amount of office space in Vancouver is on par with that of the other Vancouver, in Washington state, which is part of the Greater Portland market. Both markets also have a similar amount of office space per capita – 26.6 square feet in Metro Vancouver versus 25.6 square feet in Portland. This compares with the North American average of 29.5 square feet per person.

But new construction promises to add 6.8% to Metro Vancouver’s office inventory, according to Colliers.

“Vancouver’s increase of 6.8% puts it in first position well ahead of Seattle, San Francisco and Charlotte and more than triple the average increase for North American markets of 2.2%,” the report states.

The pace of construction in Vancouver is notable not only for the city, but for Canada as a whole.

Colliers reports that Canada has nearly 21 million square feet of office space under construction countrywide, approximately half of it in Toronto and more than five million square feet underway in Metro Vancouver. But considered against the total size of its office market, the activity shows the city, and in turn the country, is punching above its weight.

“When the ratio of new construction for each country is compared to the existing size of the office market, Canada’s Construction Intensity for office premises is nearly double that of the United States,” Colliers reports. “Canada is building substantially more office premises relative to its size.”

A key driver of the growth is the tech sector, Colliers says, as well as a vacancy rate that’s among the lowest in North America at 3.6% region-wide in the second quarter.

Top for tech

Vancouver notched the biggest rise in CBRE Ltd.’s annual ranking of the top markets for tech talent. It jumped 13 spots to No. 12, thanks to strong post-secondary institutions. The presence of supportive schools is important, because it feeds the demand for fresh talent, in an industry that, Jill Tipping of the BC Tech Association says, needs it.

CBRE reports that the majority of the 74,700 tech jobs in Vancouver last year were in computer support, database and systems positions. The segment of the industry also experienced the strongest growth between 2013 and 2018, at 69.5%. Salaries for these positions showed the strongest growth, too, rising 17.4% over the past five years to $74,734 a year (housing costs, meanwhile, have increased 30% over that period).

While office rents now stand at $43.27 per square foot and are rising in a market with declining vacancies, CBRE says business costs to locate in Vancouver are just 86% of the U.S. average. This makes it a competitive market, notwithstanding housing costs. Indeed, Vancouver ranks 10th on the continent for tech workers as a component of local employment, with 6.4% of local jobs now attributable to the tech sector.

Okanagan land demand

Recreational property sales are reflecting trends seen in other segments of the land market, according to numbers released by Re/Max last week.

Re/Max reported that three areas drove the 8% increase in overall recreational property values in B.C. since last year: Tofino, the Shuswap and the North Okanagan.

Tofino recreational property values led the way, rising 35%. Waterfront properties led the way with a median price of more than $2.5 million (non-waterfront properties, meanwhile, saw prices decline).

In the province’s Interior, Shuswap values rose 25% with both non-waterfront and waterfront properties gaining in value. The latter saw a median price of $555,000. Non-waterfront properties were the star in the North Okanagan, with the median price rising 44% to $707,500 – more than double the rise seen for waterfront properties (the median price of ski-in properties declined 10%).

The stats reflected a report from Farm Credit Canada (FCC) earlier this year. FCC said Vancouver Island saw the strongest increase in values in Canada, while some of the strongest demand in the province was for Okanagan properties.