Downtown Vancouver Hits Second Lowest Office Vacancy Rate in North America

Industrial Rental Rates Now Highest in Canada

Vancouver, BC – October 24, 2017 – In Vancouver’s increasingly hot office market, CBRE’s Canada Q3 2017 Quarterly Statistics Report shows downtown office vacancy has dropped an additional 190 basis points (bps) to 5.0%, the lowest it has been since Q2 2013. This makes it the second lowest downtown office vacancy rate in North America, with little new supply in sight for three to four years. In a sign of the office market's strength, the downtown vacancy rate has halved since the start of 2016, when it peaked at 10.0%.

“The drop in Downtown Vancouver’s vacancy to near record lows, and the current lack of available space, has become the catalyst for speculative development by conservative investors like GWL Realty Advisors and the Healthcare of Ontario Pension Plan. This demonstrates their upmost confidence in the ongoing strength of the Vancouver office market,” says Norm Taylor, Executive Vice President for CBRE Vancouver. “The fact that vacancy rates have halved in under two years is testament to the economic vitality of the city and the expansion of businesses here in Vancouver. While relief for tenants is on the horizon in terms of new buildings, in the short-term it means businesses seeking office space in Vancouver will see an upwards pressure on rents."

The tech industry continues to drive job growth and fuel demand for office space in Vancouver. Of all th​​e tenants in the market currently looking for office space, more than 50% are tech tenants. But low vacancy rates are also a result of limited new office supply, with the next construction cycle just starting and new supply not likely to hit the market for another few years.

This past quarter, Vancouver had 1.6 million square feet of office space under construction, well below the five-year average. However, with the recent announcement that construction on Vancouver Centre II has begun speculatively without pre-leases in place, the starting gun has been fired on the city’s next development cycle with up to six new office buildings expected to be announced soon.

In the Vancouver industrial market, CBRE’s latest report also shows the largest net increase in industrial rental rates in three decades. This year, industrial rental rates have risen by 12% in the city from $8.93 per square foot to $9.99, prompted by a severe lack of supply. But even with this limited supply, CBRE has noted record setting absorption, the commercial real estate industry’s measure of tenant demand. “Usually, in a market with so little available space, you would expect to see a slowdown in leasing activity as tenants increasingly opt to renew and stay put as finding space becomes harder. So, it’s been a pleasant surprise that absorption is keeping pace with last year’s record setting numbers in such a supply constrained market,” says Taylor.

“The industrial sector has long been a favourite of investors due to its slow and steady growth rates, so to see double digit increases in rental rates is staggering,” says Taylor. “We now have the highest industrial lease rates in Canada, prompted by the tight supply. It's indicative of what we predict will happen in the office market. But with Vancouver’s economy continuing to fire on all cylinders and next year’s GDP growth forecasted to lead the nation at 2.4%, we will continue to attract top talent and top companies looking to locate in our growing and vibrant city. Furthermore, with the next construction cycle now underway, this will bring thousands of new jobs to Vancouver."

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.

In Canada, CBRE Limited employs over 2,000 people in 21 locations from coast to coast. Please visit our website at www.cbre.ca. ​​​​​​​​