While Vancouver’s downtown office vacancy rate has risen to 6.6% and office absorption has gone negative – by more than 600,000 square feet – the office vacancy rate in Surrey has fallen to 4.8%, the tightest in a decade and the lowest vacancy rate in Metro Vancouver. The largest suburban city is the No.1 office market by nearly any metric.
In the fourth quarter of 2020, while office take-up fell short by 1.2 million square feet across Metro Vancouver, Surrey saw positive absorption of nearly 12,000 square feet.
Surrey has 2.9 million square feet of office inventory, yet only 138,700 square feet of space was available as of the end 2020, despite a global pandemic that has crashed office markets across the country.
“Positive annual absorption of 11,557 square feet in 2020 marked the seventh consecutive year of positive annual absorption recorded in Surrey,” noted Avison Young in its 2020 Metro Vancouver Office Market Report, released February 2.
Sublease space – leased offices returned to the market – ballooned this year across the Metro region, reaching nearly 560,000 square feet downtown and 319,000 square feet in Burnaby, for a regional total of more than 1.1 million square feet. Surrey, however, had less than 10,000 square feet of sublease space as 2021 began.
This year, tenants and strata office buyers are expected to snap up more than 219,000 square feet of Surrey offices, according.to Avison Young, and most of that will be in brand new buildings.
In 2021, the Professional Centre, by Avondale Development and the Monarch Group, and the King George Hub, by PCI Group, will deliver a total of more than 241,000 square feet but both projects “have already registered substantial preleasing,” Avison Young noted.
A third new project, Lark Group’s City Centre 3, has pre-leased or sold 54% of its 122,390 square feet of office space, though it won’t open until the second quarter of 2021.
Such Class A space is demanding net rental rates of $28-38 per square foot. Strata office prices are north of $625 per square foot.
After these three projects complete by the end of this year, there may be a lull before any new space arrives.
Surrey City Development Corp.’s proposed Centre Block in Surrey’s core, with 1.2 million square feet of office and commercial space, remains in the permitting stage; and the planned 518,000-square-foot tower in central Surrey, by Blackwood Partners, will only proceed if pre-leasing is solid.
Bottom line is that Surrey will continue to lead Metro Vancouver in low office vacancies and premium rental rates this year, industry sources said.