Work from home trend empties office buildings
Vacancy rate downtown now higher than during 2008 global financial crisis
At 6.7 per cent, Downtown Vancouver's office vacancy rate has risen above the peak levels that followed the global financial crisis in 2008, when many companies shed their prime office space.
In the first quarter of 2020 a year ago, the rate was just 3.1 per cent.
There have been other steep increases in vacancy rates, according to Ross Moore, a managing broker at real estate company Cresa, but that was because new buildings were coming onto the market, such as in 2015 when the addition of Telus Garden, 745 Thurlow, MNP Tower and others sent the vacancy rate soaring to 9.6 per cent.
There are 13 office buildings currently under construction in Downtown Vancouver. With those additions, the vacancy rate could hit 18.3 per cent, “which is a whole lot more sobering,” said Moore.
Optimism about the vaccine rollout has given hope to office life resuming, but there are also fresh concerns about faster-spreading COVID -19 variants and a return to more working from home.
“My sense is that companies are looking through the recent rise in variants and lockdowns. Certainly, every office tenant I'm working with at the moment is staying the course,” said Moore.
“All are assuming a hybrid model.”
Companies are trying to determine the amount of office space needed to weather what will be a blend of working remotely and in person.
Nearly half of all office vacancies across Metro Vancouver are located downtown, according to a new report by commercial real estate firm CBRE, which stated that “many tenants continue to take a wait-and-see approach before determining their new modern office requirements.”
“It's primarily B and C class buildings and spaces less than 6,000 square feet that are seeing vacancies,” said Vancouver-based CBRE managing director Jason Kiselbach.
“We entered last year with the most under-construction office space in Downtown Vancouver in the history of the city,” said Kiselbach. “There is actually still a shortage of supply of vacancy in the triple A (newer, more expensive and prime location) building space, as well as in larger blocks of space.”
He said more than 60 per cent of this office space that's currently under construction has been preleased by major companies. The CBRE report noted that, in downtown Toronto, office vacancy hit 9.1 per cent in the first quarter, its highest level since early 2008.