Vancouver Leads Major Global Markets in Prime Office Rent Growth
14 Jun 2019
31% rent jump in 2 years is greater than London, Tokyo and New York combined
Vancouver's downtown prime office market logged the largest year-over-year increase in occupancy costs of any Canadian city in the first quarter of 2019, climbing 12.9% since Q1 2018, which also ranks as the seventh largest increase globally, according to CBRE's 2019 Global Prime Office Occupancy Costs report.
Over the past two years, the rate of growth of Vancouver prime office rents has been greater than the growth seen in London, Tokyo and New York combined. Since 2017, Vancouver’s office rents have increased by 31.1%. Vancouver is the only city in the CBRE ranking to place in the top 10 for rent increases two years in a row.
"It comes as no surprise that the cost of renting office space in Vancouver is climbing so quickly. We've got a powerful combination of strong tenant demand, limited available space and new supply that is still years out," said Norm Taylor, Managing Director for CBRE Vancouver. "The ongoing challenge for occupiers is to secure quality space that meets the increasingly exacting demands of the workforce, while also controlling costs."
By comparison, Toronto's downtown office market, despite having had North America's lowest vacancy rate in recent years, registered a 13.3% increase in prime office occupancy costs over the past two years. This can be attributed to Toronto being farther along in its development cycle, with nearly 3.5 million sq. ft. of new downtown office supply slated for delivery within the next year.
Vancouver has less new product due for near-term delivery, putting increased upward pressure on rental rates in existing buildings. CBRE is projecting Vancouver downtown office vacancy to drop to the lowest in North America in Q2, which suggests there is little relief on the horizon for Vancouver occupancy costs. "While Vancouver's had Canada's greatest office occupancy cost increase," noted Taylor, "the city is only the 66th most expensive market globally, with rents 1/6th of those in Hong Kong, the world’s most expensive office market, and 1/4 of those in London, the world’s second-most expensive market."
According to the CBRE report, office tenants continue to seek high-quality space in markets with robust infrastructure and social amenities. The competition for top talent remains intense with physical space offering companies a cultural advantage. Combined with limited supply and moderate construction pipelines, prime office occupancy costs have risen to new heights. As of Q1 2019, 85 of the 122 markets tracked by CBRE had increases in prime office occupancy costs. Of those 85 markets, 16, including Vancouver, recorded increases of 10.0% or more.
You can read and download the full 2019 Global Prime Office Occupancy Costs report here.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of 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 2,200 people in 22 locations from coast to coast. Please visit our website at www.cbre.ca.