Derrick Penner
Sun
In the first half of 2009, companies have vacated, downsized, or made available through sublease, downtown Vancouver office space equivalent to a new office tower, according to research from a major commercial broker.
This “negative absorption,” as commercial realtors call it, is the result of corporate contraction in the face of recession, commercial realtor Avison Young said in its mid-year report.
It helped push Metro Vancouver’s overall office vacancy rate up to 7.4 per cent at mid-year compared with 5.4 per cent at the end of 2008. And Avison Young expects that rate to rise as a result of further office closures that have been announced, but where tenants have yet to leave.
Online auction firm eBay, which announced it is closing its Burnaby operations, is one example of still-occupied space that will become available.
“I don’t know that we’ve felt the full impact of that [space] becoming available yet,” Darrell Hurst, principal of Avison Young’s Vancouver office, said in an interview. “There is still more to come.”
Hurst said the downturn has hit Metro Vancouver businesses across the board, including financial services, the resource sector and other service businesses. But he said there are longer-term signs of life. More prospective tenants are starting to view available space compared to earlier in the year, and some firms are committing to taking significant blocks of space in 2010 and beyond.
“So we’re reasonably optimistic for the latter half of 2010,” Hurst said, “and we may be pleasantly surprised by [the second quarter] of 2010.”
Avison Young broker Matthew Craig said that downtown, office tenants had vacated 487,775 square feet (45,315 square metres more office space than they leased in the first half of 2009, which is “roughly equivalent to the size of a new office tower.”
Downtown’s office vacancy climbed to five per cent at mid-year compared with 2.5 per cent at the end of 2008. However, Craig said the offices left vacant were mostly smaller spaces.
“Worth noting is that there are no notable large-sized tenant defaults to date despite the global credit turmoil,” Craig said.
Vacancy rates for the largely institutionally owned top-tier buildings, Craig added, remain “at or below prevailing market rates.”
Hurst said that even with businesses weathering the “current economic tailspin,” Metro Vancouver’s office leasing market is still one of the tightest in North America.
The effect of rising vacancies, particularly of subleases where tenants are willing to let out some space on a temporary basis, Hurst said, has been to give new tenants more choice and put downward pressure on rents.
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