Vancouver’s downtown office sector has seen sublease space increase by 347 per cent this year, pushing the vacancy rate from 4.2 per cent in the second quarter to 5.7 per cent as of the third quarter, according to a survey by JLL Canada. In comparison, Metro Vancouver’s suburban office market has seen only a slight increase in vacancies, increasing to 8.8 per cent from 8.2 per cent in the previous three-month period.
For the first nine months of this year, Vancouver’s downtown has seen total office take-up go negative by 226,000 square feet while suburban markets have seen positive sales or leasing of nearly 200,000 square feet of space, according to industry sources.
The two markets have a similar inventory of offices, with 27.2 million square feet in the downtown, including Gastown and Yaletown, compared to 24.6 million square feet in the seven major suburban areas profiled. The downtown financial district has 23.6 million square feet of office space, with most of it in prime Class A property.
Burnaby, North Shore and Richmond saw vacancy rates increase modestly, while Surrey and New Westminster reduced their vacancy slightly, and Langley reported a drop from 12 per cent to 6.1 per cent, quarter-to-quarter, and the Tri-Cities vacancy stayed the same, NAI Commercial found in a separate survey.
Total subleases now account for 23.4 per cent of vacant office space in the suburbs.
Vancouver’s downtown market has the highest sublet availability rate in Canada at 32.5 per cent, a jump from 21.8 per cent recorded at the same time last year, according to a national survey by Altus Group. In all, about 750,000 square feet of sublease space has been shoved back onto the downtown market since COVID-19 arrive in March, but much of it has been leased up.
A key reason for this increase in subleases is because a number of downtown tenants are testing the market as their workforce continues to work from home, so existing premises sit empty, according to JLL Canada.
The glut of downtown subleases space – which is also being seen in Calgary, Toronto and Montreal – presents a “rare opportunity” for Vancouver tenants to secure large blocks of high-quality space, since most of the subleases are in top-tier towers, JLL suggests.
In the third quarter, Real Estate Council of B.C. took two floors of subleases at 750 West Pender (18,908 square feet) and B2Gold Corp. leased three full floors (45,169 square feet) in 666 Burrard.
JLL also noted that SNC Lavalin vacated more than 81,000 square feet earlier this year at 745 Thurlow Street, one of the largest blocks of new vacant space. “However, that space has already been leased and will be occupied later in the year,” the agency stated.