Vancouver’s tenants are in a mad scramble for usable office space amid a tight and competitive environment, according to Avison Young’s Tenant Profile Report Q1 2019.
Supply scarcity and record-low vacancies are driving a steady increase in the city’s rental rates, which will go on to fuel future office price growth.
“Rising rental rates and highly limited availability may start forcing tenants to consider locating outside of Downtown Vancouver in order to fulfill their office requirements. With limited relief until at least 2021 in terms of new development and vacancy expected to remain historically low through 2019 and 2020, upward pressure on rents is likely to continue for all tenant sizes,” Avison Young explained.
Tight availability rates are forcing large-scale tenants (those with size requirements exceeding 30,000 square feet) to “plan much farther ahead than typical and explore future opportunities through preleasing or backfilling space that may become available in the future,” the report noted. “They will need to be proactive and flexible well in advance of their lease expiry simply to find an option that suits their existing needs, let alone improve on their current office space.”
Meanwhile, tenants looking for space sizes of 10,000 - 15,000 sf are faced with punishing scarcity. From Q3 2018, the availability of such spaces declined by more than 80 basis points to end up at 0.2% as of Q1 2019.
Most crucially, small tenants (those looking for 1,500 -2,500 sf spaces) are faring the worst in this environment, with total availability falling from 1.3% in Q3 2018 to 0.59% in Q1 2019.
“Location, amenities, eco-friendly standards, access to public transit, floorplate size, IT infrastructure and building security along with lease costs are important considerations for tenants reviewing their real estate requirements. However, various combinations of these variables can limit the amount of options available to tenants and may have significant implications for overall cost and deal structure.”
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