Industrial real estate isn’t the only market with a strong 2016 outlook, as the office market is also experiencing a balanced and busy year ahead. In Q4 of last year, Downtown Vancouver had a 9.3% vacancy rate, the suburbs were at 11.3%, and Metro Vancouver experienced 10.4%. Jeff Lim, Vice President of Leasing at Bentall Kennedy, said at our last Breakfast Event that this first quarter is the “busiest I’ve ever been”, noting that similar volume hasn’t been seen since 2008.
Naturally, a healthy economy means businesses are in need of office space to accommodate their growing staff. And though the natural resources market has fallen, “tech bailed us out”, according to Paula Wright, Leasing Director of Manulife Real Estate. Currently leasing close to 800,000 square feet of office space in Metro Vancouver, the technology and digital media sector are leading all other industries considerably. At a distant second place are consumer goods followed by legal services, architectural/engineering, and financial services.
Other factors that have contributed to the current office market include positive migration and population growth. With more potential staff to employ, companies are drawn to this corner of Canada to monopolize on west coast talent. The rising American dollar has also made Vancouver an attractive choice, particularly to tech companies.
And with our picturesque backdrop, world-renowned mountains, and laidback lifestyle, it’s no wonder that companies from the U.S. are enticed to relocate up north. Location is one of the most important factors to tenants, and Paula explains that companies need to attract the largest demographic of the workforce, millennials, by offering impressive office spaces in buildings close to transit.
Matt Walker, a Principal at Avison Young, also notes that flexibility has become a major factor in a tenant’s decision-making process. Because tech companies are always changing, they could rapidly grow or fold in just a few months. This means they can’t predict whether they’ll need more office space within six months, a year, or three. Therefore, they need shorter contracts and flexibility to accommodate the fast-paced lifestyle.
While leading experts agree that Vancouver’s office market is currently healthy, balanced, and normalized, there are some concerns that could affect the future of this dynamic market. Stay tuned, as we’ll cover these issues in our next blog post!