Despite low vacancies and record setting lease rates, Vancouver’s office market isn’t without its set of challenges. There are a number of current issues brokers, developers, and tenants face that could easily shift the current progressive environment.
Lack of Supply
The fundamental concern for any branch of real estate in Vancouver remains the same: availability. Land is limited, which means every square foot comes at a premium. As industries like technology and consumer goods continue to lead the market, so too are their demands for more space with high-end finishes in a prime location. This means that those who require 50,000 sqft or more may have to seek offices outside our city or province altogether.
Speaking of our technology sector, it’s no secret this industry has experienced rapid growth over the past five years. And because this industry moves faster than any other, their potential to grow – or fail – can seemingly happen overnight. That’s why flexible contracts are key to hone in this sector, which remains a challenge to landlords who traditionally opt for 3, 5, or 10-year contracts.
Twenty years ago, a few key owners controlled the office market. Now, foreign investment has disrupted all facets of real estate, resulting in more competition for both developers and tenants.
As the largest demographic in the Canadian workforce, employers have to cater their workspace to attract talent. From proximity to transit to brand new gyms, more and more companies are seeking state-of-the-art facilities to entice the next wave of professionals. This means lower grade buildings are no longer desirable, yet AAA buildings are becoming harder to find.
Virtual and Co-Working Spaces
The traditional workplace has changed dramatically, as the internet has allowed employees to work both remotely and virtually. Replacing cubicles for coffee shops, companies are more inclined to cut the expense of office rents in favour of a co-working or cloud-sharing set-up.
Gavin Reynolds, Senior Vice President of JLL, explained there are currently 6,000 students on the waitlist for housing at the University of British Columbia. This is just one example of how our residential market affects all branches of real estate. Although the Canadian dollar is attractive for American companies, our condo and housing prices are not. Finding places for employees to live has become a major deterrent, as demand and prices continue to skyrocket.
Whether you’re a tenant, landlord, or developer, what challenges are you facing in the office market? Tweet @NAIOPVancouver and let us know!