Michael Kane
Sun
Office vacancy rates are falling in the Lower Mainland thanks to higher demand fuelled by the province’s robust economy, according to the Business Council of British Columbia.
The result is more balanced conditions in what has been a tenants’ market for several years.
“We have been waiting for a long time and things are finally starting to turn,” said Avtar Bains, senior vice-president with Colliers International.
“It is a balanced market where the negotiations between landlord and tenant are on a level playing field and where no one has the upper hand to any great extent.”
But the report, published in the council’s latest newsletter, cautions the balance could shift in favour of landlords in the run-up to the 2010 Olympics.
Wendy Waters, the report’s author and research director for Avison Young Commercial Real Estate, predicts Greater Vancouver office vacancy rates will fall to 12.1 per cent this year, 9.5 per cent in 2006, 7.5 per cent in 2007 and six per cent in 2008.
The office market is even tighter in downtown Vancouver where vacancy rates are forecast to fall to 10.3 per cent this year and seven per cent in 2006.
Waters notes:
– In 2004, office vacancy rates in Greater Vancouver dropped from 15.7 per cent to 12.1 per cent with a net absorption of more than 1.4 million square feet — enough room to accommodate 7,000 new office workers.
– In downtown Vancouver, the vacancy rate fell from 13.5 per cent to 10.3 per cent with net absorption of 700,000 square feet — room for 3,500 office workers.
– Demand for office space is being driven by B.C.’s rebounding resource industries, continued growth of the region’s technology and other knowledge-based industries, the expansion of global trade and Greater Vancouver’s gateway role.
– Office vacancy rates in Greater Vancouver are projected to continue declining, creating tighter over-all conditions, as the region’s economy gains momentum and spending associated with the 2010 Olympics takes place.
Waters suggests businesses with expiring leases, or looking to expand between now and early 2010, consider negotiating early renewal or future expansion rights sometime this year.
“Assuming that the economy continues to do well, as widely expected, vacancy rates will almost certainly decline, further restricting location options and driving lease rates higher,” she says. “And as 2010 approaches, increased demand from Olympic-related users will further reduce space options for local business.”
Waters notes the industrial real estate market is also strong with Greater Vancouver showing the lowest industrial vacancy rate in North America.
She says key changes reshaping the region’s industrial real estate market include the trend to build larger warehouse-distribution facilities, a shifting of the industrial real estate base to the eastern parts of the Lower Mainland, encroachment of other uses on urban industrial space, and rapid growth in global container traffic.
© The Vancouver Sun 2005