Metro Vancouver, BC Metro Vancouver Prolific Downtown and Suburban Office Leasing Vacancy & Absorption Trends
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2017 Year-End Office Market Report Metro Vancouver, BC metro Vancouver Prolific downtown and suburban office leasing vacancy & absorption trends Vacancy Rate activity heightens regional supply constraints 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% emand for office space in Metro Vancouver later. Much of the delay was simply attributable Dcontinued to climb through 2017 with vacan- to fixturing periods as deal velocity through 2017 2018F 437,640 7.3% cy tumbling to 8% at year-end 2017 – the lowest remained robust and will likely lead to a similar regional vacancy recorded since year-end 2013 but slightly smaller decline in vacancy in 2018, and a decline from the 9.7% registered at year- particularly Downtown, as the number of options 2017 8% 1,223,656 end 2016. Vacancy in all but three submarkets grows fewer. With no new Downtown office was sub-10% at year-end 2017 with two of those space scheduled for completion until the end of three submarkets – Surrey and New Westmin- 2016 856,868 9.7% 2019, vacancy is expected to tighten considerably ster – forecasted to also drop below 10% in 2018. by the end of 2018. Vacancy in New Westminster Regional annual absorption of 1.22 million square is also expected to drop significantly in 2018 as 2015 10% 1,334,604 feet (msf) in 2017 was the second-most annual the long vacant Anvil Centre is finally occupied absorption recorded since 2005, surpassed only by a wide range of tenants, including Douglas by the 1.33 msf of annual absorption recorded in College, which signed the largest suburban lease 2014 92,870 9.4% Metro Vancouver in 2015. All submarkets except deal in Metro Vancouver in the back half of 2017. one – the North Shore – registered positive annu- Vacancy on the North Shore is also expected to al absorption in 2017 and were led by Vancou- decline as tenants such as COWI occupy the new 2013 -158,905 7.8% ver-Broadway, Burnaby, Downtown and Surrey. CentreView development in 2018, which was -400, 0 40 80 1, 1, Much of the leasing activity that manifested in added to inventory as largely vacant at year- 0, 0, 20 60 000 000 0, 0, 00 000 000 0 the statistics at year-end 2017 in the Vancou- end 2017. With almost two-thirds of new office ver-Broadway, Burnaby, Downtown and Surrey development in Vancouver-Broadway set for Absorption Rate (sf) submarkets was actually completed in 2016 delivery out to 2020 already preleased, vacancy is Vacancy Absorption and early 2017 and is what led to the substantial expected to tighten further. In virtually all Metro drop in vacancy and increase in absorption as 12-month projection based on 10-year average absorption Vancouver submarkets, vacancy will remain stable and known net absorption in new inventory tenants occupied their spaces six to 12 months continued on back page METRO VANCOUVER OFFICE VACANCY SUMMARY (YEAR-END 2017) INVENTORY HEAD LEASE SUBLEASE TOTAL VACANCY 12-MONTH DISTRICT (SF) VACANCY (SF) VACANCY (SF) VACANCY (SF) RATE (%) ABSORPTION (SF) Downtown 22,943,145 1,520,204 101,438 1,621,642 7.1% 200,811 Yaletown 2,047,372 83,092 3,039 86,131 4.2% 52,735 Vancouver-Broadway 6,583,900 370,169 20,700 390,869 5.9% 425,059 Burnaby 9,256,790 574,981 255,199 830,180 9% 323,759 Richmond 4,215,800 298,387 114,397 412,784 9.8% 37,554 Surrey 2,906,607 293,385 0 293,385 10.1% 177,793 New Westminster 1,688,572 278,418 2,358 280,776 16.6% 6,678 North Shore 1,450,898 187,864 0 187,864 12.9% -733 TOTAL 51,093,084 3,606,500 497,131 4,103,631 8% 1,223,656 Vacancy rate December 31, 2017 8% Absorption (demand) Vacancy (supply) Rental Rates Vacancy rate June 30, 2017 9.1% Partnership. Performance. avisonyoung.com Downtown Downtown vacancy temporarily stable due to delivery of vacant space Vacancy trends GWL Realty Advisors Downtown vacancy remained stable will deliver at 7.1% at year-end 2017, almost VAncouver unchanged from 7.2% a year earlier; CEntre II however, vacancy rose by 30 bps from 6.8% at mid-year 2017 due primarily to in 2021. the addition of 252,000 sf of vacant office space at The Exchange in the fourth quarter. While approximately 85,000 sf of the office space has been preleased in the Exchange, the tenants – National Bank, Hyperwallet Systems, Smythe LLP and Sovereign Insurance – will year-end 2017 from 4.7% a year earlier. market also generated activity but had not occupy until mid-to-late 2018 at the Class A vacancy continues to tighten, a negligible effect on net absorption, earliest. This addition to inventory – the dropping to 6.7% at year-end 2017 from positive or negative. With few vacant and last new office tower of the previous 9.8% 12 months ago. Class B vacancy available large blocks of contiguous space construction cycle, which had delivered also declined, slipping to 6% from 6.4%. Downtown, alternative options for larger several new office buildings in 2015/16 Class C vacancy actually increased to tenants are diminishing. – pushed class AAA vacancy to 8.2% at 8.3% from 6.1% in that 12-month period. Strong leasing velocity had placed the absorption trends recent lease deals - YEAR-END 2017 (>10,000 sf) Downtown market on a trend towards Annual absorption of 200,811 sf in 2017 lower vacancy in 2017, but a statistical tenant BUILDING SF marked the third straight year of positive pause due to the delivery of the mixed- annual absorption recorded in the down- Amazon 402 Dunsmuir Street 147,000 use Exchange building (the office portion town core. The vast majority of absorption Spaces 939 Granville Street 67,000 of which still remains approximately in 2017 was recorded in class A buildings, 63% available) has temporarily delayed WeWork Bentall 2 54,000 which offset negative absorption in class B that trend from manifesting in the data. and C properties. Absorption in class AAA Legal Services Society 510 Burrard Street 50,000 Sublease vacancy remained insignificant premises was limited by a lack of supply Facebook Waterfront Centre 45,000 in the Downtown market in 2017, in 2017. After peaking in 2015 at 1.1 msf dropping to just 6.3% (101,438 sf) of total Peoples Trust (renewal/expansion) 888 Dunsmuir Street 35,600 (the most annual absorption recorded vacancy from 7.8% (128,232 sf) a year Downtown since Avison Young started BCBC (renewal) Oceanic Plaza 28,400 earlier. There were almost no significant tracking the market in 1996), absorption Splunk (sublease) 555 Robson Street 27,360 sublease deals (greater than 10,000 sf) has remained positive but declined in Kasian (renewal) 1500 West Georgia Street 26,000 completed Downtown in 2017. New each subsequent year. This most recent and expanding occupants continue to Oracle Canada (renewal) Bentall 1 24,800 three-year run of positive absorption redefine the tenant mix in Downtown (2015-2017) totalled 1.69 msf, which was Canada Drives (renewal/expansion) Bentall 2 19,800 Vancouver with continued demand from less than both of the previous three-year Flight Centre 980 Howe Street 18,200 technology and co-working companies runs of positive annual absorption the driving much of the activity. A lot of Real Estate Council of BC Pender Place II 17,400 market has experienced since 1996: 2004- (renewal/expansion) movement from existing tenants in the 2006 (2.02 msf) and 2005-2007 (1.71 msf). Great-West Life Assurance Co. Bentall 4 16,800 Vacancy with Space Availability Factor (SAF) and Absorption Pretium Resources Bentall 4 16,800 14.0% 1,101,041 1,200,000 Aurora Cannabis 510 Seymour Street 16,800 12.0% 1,000,000 Wesbild Holdings Royal Centre 14,700 2.8% 800,000 Miller Titerle + Co. 638 Smithe Street 14,700 10.0% 3.8% 3.4% iQ Office Suites Royal Centre 14,200 3.4% 9.3% 2.2% 600,000 F 2.8% e A 8.0% t S a / R xMatters 510 Burrard Street 14,600 400,000 e 387,909 n t 7.1% o i a 6.0% 6.8% 7.2% t R 222,873 Indochino (sublease) 720 Robson Street 14,000 p y 5.7% 200,000 r c 200,811 6% o n s a Kabam 1075 West Georgia Street 13,800 4.0% b c A a 0 Fluor Canada (renewal) 1075 West Georgia Street 13,800 V 2.0% -270,560 -200,000 Safeway 1050 West Pender Street 11,000 -304,835 BBA Engineering 1050 West Pender Street 11,000 0.0% -400,000 2014 2015 2016 2017 2018F Preszler Law Firm 1075 West Georgia Street 10,800 Vacancy Absorption SAF* Space Availability Factor VanWest College (renewal) 1016 Nelson Street 10,800 12-month projection based on 5-year average absorption and known net absorption in new inventory, Innergex Renewable Energy 1185 West Georgia Street 10,500 and 10-year average SAF. 2 Partnership. Performance More than 2.1 msf scheduled for completion by 2021 Downtown The occupancies of WeWork in Bentall and represents a wave of fewer, but much to 18 months. Vacancy may drop by up to 3, Kuehne + Nagel at 900 Howe Street larger buildings. These three projects are 150 bps with Downtown vacancy likely and Sophos at 777 Dunsmuir Street all likely to be delivered in 2022/2023 and will to land below 6% by year-end.