In the final quarter of 2024, Metro Vancouver’s office and industrial sectors followed diverging trajectories. Recent data from CBRE highlights shifting vacancy rates, absorption levels, and lease rates, with an evolving supply landscape. As market participants assess trends and forecast future activity, both sectors revealed unique challenges and opportunities.
Vancouver Office Market
In Q4 2024, the overall Metro Vancouver office market saw vacancy rates grow slightly by 30 basis points, reaching 11.2%. However, a closer examination of geographic nuances reveals diverging trends between the suburban and downtown sectors. Suburban markets experienced a notable increase in vacancy, rising 80 basis points to 10.8%, while the downtown core saw a decline of 30 basis points to 11.5%. The CBRE notes that with the construction cycle drawing to a close and 91.2% of new supply already absorbed, there is cautious optimism that vacancy rates in downtown will gradually decline.
Suburban markets have faced a more pronounced adjustment. A year-over-year surge of 310 basis points in vacancy underscores the impact of new, vacant supply coupled with a sustained trend of prioritizing quality office spaces. Tenants are more and more choosing to relocate to highly amenitized office spaces, driving a widening gap between asset classes. Historically, vacancy rates between Class AAA/A and Class B/C inventory moved together; however, the gap has expanded to 520 basis points. This divergence indicates that lower-quality, unamenitized properties are losing ground to their more competitive counterparts. Despite these challenges, the overall market absorbed 64,000 square feet of net space, even as 583,000 square feet of office space remain under construction.
Leasing activity in the downtown area contributed positively, with nearly 550,000 square feet of gross leasing and a net positive absorption of 76,000 square feet. These figures have helped lower vacancy rates. Downtown average asking lease rates dropped to $37.20 per square foot, for a 3.8% decline on an annual basis, while suburban markets saw rates grow by 7.2% to $29.47 per square foot.
Looking ahead, the supply outlook remains a key factor. With record new supply pushing vacancy levels to a 20-year high, the downtown core is nearing the end of its current development cycle, with only one competitive project expected to come online in late 2025. In contrast, the suburban market is set to absorb an additional 553,000 square feet of new supply over the next 12 months, which could continue to strain occupancy levels, particularly in areas where pre-pandemic demand has yet to reemerge. Additionally, the CBRE reports that more than 70% of headlease deals over 5,000 square feet have terms for five years or longer, suggesting a cautious long-term commitment by tenants in the face of market uncertainty.
Vancouver Industrial Market
Metro Vancouver’s industrial sector, though historically resilient, showed some difficulties in Q4 2024. Nearly 1.9 million square feet of new industrial supply were delivered, but only 33.2% of that space entered the market with pre-commitment agreements. As a result, the market’s overall vacancy rate increased by 100 basis points to 3.8%, which is higher than the five-year average of 1.5%. Market availability also climbed to 5.3%, up 120 basis points from the previous quarter.
The influx of vacant industrial supply has had a direct impact on leasing activity. Q4 recorded a net negative absorption of 848,000 square feet, marking the first instance of such contraction since the Global Financial Crisis. Average asking lease rates fell to $20.09 per square foot, a 60 basis point drop from the previous quarter, though rates remain above the five-year average of $18.20.
Sublease availability as a proportion of total industrial space has contracted, now standing at 15.9%. Despite this reduction, the continued delivery of new, vacant supply is expected to keep competitive pressures high, particularly for Class A and B properties. With construction activity slowing, the pipeline for future deliveries is expected to moderate. The CBRE forecasts that an estimated 5.5 million square feet of industrial supply is slated for delivery by mid-2025, however.
Looking forward, the CBRE also reports that market participants are optimistic about the long-term outlook for Vancouver’s industrial sector, even as Q4 highlighted near-term challenges. With fewer new projects anticipated in 2025 and an improved focus on leasing quality and location, the market is poised for a gradual rebalancing.
