Vancouver’s downtown office vacancies have dropped for the fifth quarter in a row, says a new report from a leading real estate brokerage.
The city’s already-diverse economy has benefited from factors such as a rebound in the high-tech sector and the call-centre industry, says Chris Clibbon, a senior research analyst at CB Richard Ellis in Vancouver – which means more space is needed as more people are hired.
“In future, we’re going to run out of office space in downtown Vancouver,” he notes, with more people working out of suburban office locations. Building office towers isn’t the answer – downtown Vancouver has height restrictions to preserve “viewsheds,” the attractive vistas of the mountains across the water.
The biggest office building currently in the Greater Vancouver market is Central City in Surrey, at a million square feet. When the building first opened in 2003, vacancy automatically hit 48 per cent but was followed by a decline. It’s now sitting at 28.6 per cent as JP Morgan Chase Manhattan, a customer-service call centre from New York, has occupied more than 120,000 sq. ft. in the Central City building.
Simon Fraser University assumed 200,000 sq. ft. of Central City for a Surrey campus to open in 2005.
“We want to expand our course offerings in an area of B.C. that’s traditionally under-served by higher education,” says SFU spokesman Terry Lavender.
The Lower Mainland south of the Fraser River now has two university colleges and the private Trinity Western University.
SFU has an enrolment of about 20,000 students with 600 attending a temporary campus south of the river. The B.C. government has committed to 25,000 new post-secondary spaces by 2010, so SFU Surrey will have 2,500 students by 2005, he says.
SFU Surrey now occupies two floors, offering programs in business, computer science and interactive arts. Eventually, a full campus experience will be available in Surrey, with a Skytrain link to downtown Vancouver.
Meanwhile, the hottest real estate markets in Canada are in Alberta, with high oil prices and continuing energy development powering the sector.
The rest of the country is lagging behind, says the report from CB Richard Ellis, one of the largest real estate brokerages in the country.
CB Richard Ellis lists the national vacancy rate for downtown and suburban office space at 13.5 per cent at the end of June, up slightly from 13.3 per cent a year ago. Demand was also up negligibly.
Six markets – Vancouver, Toronto, London, Calgary, Edmonton and the Waterloo Region – experienced a decline in vacancy rates in the first half of 2004. Calgary’s downtown market has a vacancy rate
hovering around 10.2 per cent.
CB Richard Ellis Alberta Ltd. says that high oil prices and major development projects have pushed down Edmonton’s downtown office vacancy rate a full percentage point. Calgary’s office vacancies dropped 2.2 per cent downtown and 1.6 per cent in the suburban markets.
Large blocks of contiguous space are becoming more difficult to find, which could put upward pressure on rental rates in the future, the brokerage says. The survey adds that as absorption levels increase due to increased demand, supply and demand fundamentals will start to prevail and rents will begin to move.
In Edmonton, vacancy will continue to drop slowly in the next quarter, predicts Dean Wulf, vice-president and general manager at Royal LePage Commercial.
With the vacancy rate going down, tenants will have fewer options, while landlords will gain more confidence to move rates up.
The real estate market is feeling the effects of the strength of the Alberta economy, with real estate for investment in short supply.
(Murdoch Macleod can be reached at
murdoch@businessedge.ca)
