Looking for affordable office space? You might want to start looking in the ‘burbs.
Business owners can look forward to paying more for prime office space in downtown Vancouver over the next few years until new supply hits the market, according to real estate firm Newmark Knight Frank Devencore.
“The class ‘A’ market will remain a landlord’s market for the foreseeable future, with top quality office spaces commanding top dollar,” commented Jon Bishop, vice-president and general manager of Devencore Co. Ltd. in Vancouver.
“With vacancy rates in the downtown core returning to pre-recession levels, we project that rental rates will eclipse those achieved during market peak of 2008.”
Downtown Vancouver’s vacancy rate for Class A buildings has dropped to 3.3% in the last six months, the firm said, and almost all of that space is found in smaller blocks.
As the market becomes increasingly constricted, Newmark Knight said more tenants are likely to look to Burnaby, Surrey and Richmond for affordable office space.
But Bishop said many companies would likely stay in Vancouver because it’s too costly to pick up and move an operation to the suburbs.
“There’s a real corporate shift that has to take place in order to do that successfully," Bishop told Business in Vancouver. "There’s probably too much risk to pack up and move out to the suburbs."
Commercial real estate specialist Avison Young published a similar report in January, noting that the tight market creates problems for both landlords and tenants. (See “Downtown office space tight” – BIV Business Today, January 26.)
“While limited alternatives for tenants may allow landlords to push harder on lease rates, it also creates problems for landlords who are unable to accommodate expanding tenants or new entrants to the market,” Avison Young principal Bill Elliott said in January.
Meantime, Greater Victoria is expected to see more activity soon as vacancy rates hit a 10-year high of 9%, according to Newmark Knight.
Vacancy rates in Greater Victoria tracked between 2% and 3% as recently as 2008.
In the last few months, tenants looking for office space in the capital region have been able to negotiate improved leasing and financial terms, Bishop said.
Joel McKay
Twitter: jmckaybiv