Your boss will lease your next office in these neighbourhoods
Commercial real estate can indicate the health of the local economy. Here’s what it says about the future of work in Vancouver.
Today’s university graduates might never work in a traditional office. Gone are the daily nine-to-five commutes, homemade lunches dumped in a communal fridge, and watercooler gossip; instead, today only 19 percent of remote-capable employees are fully on-site, with the remainder split almost equally between totally-remote and hybrid working environments. It’s a trend that commercial real estate experts expect to continue.
Metro Vancouver’s office market has not been immune to the pandemic slump, but a new report from Avison Young suggests that the uptake in leases seen in the latter half of 2021 continued to grow in the first half of 2022. Absorption – the amount of space or units occupied in a specific year – the report says, is positive for both the downtown core and suburban markets, signalling that Vancouver businesses are trending towards a commitment to some kind of office space for their employees that can support a hybrid or remote-first work arrangement.
Commercial real estate can often be an indicator of the health of the business environment more broadly. Here are four key takeaways from the report.
The Broadway corridor is becoming more desirable
There’s no doubt that the Broadway subway – and the accompanying Broadway Plan – will transform the face of Vancouver over the next few decades, culminating in what will likely become a second city skyline. It’s possible that the development planned for the region is being reflected early in office space rentals. The overall vacancy rate, the report says, was 8.5 percent at mid-year 2022: a significant decrease from the 12.4 percent overall vacancy rate at the same time last year. The reduction was most evident in both Mount Pleasant and False Creek Flats – two neighbourhoods that are set to see big facelifts in the coming decades.
Richmond is booming
The city of Richmond might not be the first place that comes to mind when considering local tech companies, but the location is home to significant tenants including Rivian and General Fusion. Commercial rental rates edged up slightly this year in the neighbourhood, a trend that is set to continue through to the end of the year as vacancy rates and quality class A options continue to decrease. Another jump in prices can be expected in late 2023 or early 2024, depending on when the Canada Line SkyTrain extension is completed, as ease of access puts upward pressure on affordability. Despite that, the average rental rate is the lowest of all secondary markets in Metro Vancouver, meaning the location is a great opportunity for cash-strapped businesses to lease a space in an up-and-coming hub.
Big companies hold steady
Not surprisingly, given workers’ positive feedback on work-from-home arrangements, employers are reconsidering how they use their space. A number of Vancouver leases are due to reach expiry in the coming months, prompting tenants to execute (or not) on their return-to-office plans. Smaller companies might be looking to downsize to make more efficient use of the space, but larger businesses look like they’re set to hold on to their big corporate offices. The report suggests that there are no indications of existing larger blocks of space becoming available in the near future.
The downtown core continues to add premium office space
The square footage of class AAA space – premium buildings that can feature significant architecture and main lobbies with exceptional finishes, a range of amenities, and an environmental certification – is growing on the downtown peninsula, largely due to three buildings: Deloitte Summit, 601 West Hastings Street, and Bentall 4 (the first two of which recently completed construction during the latter half of 2021.) There are also a number of other large buildings in the works – for example, Oxford Properties’ The Stack and GWL Realty Advisors and HOOPP’s Vancouver Centre II – which are set to be finished in the second half of 2022, both offering significant amounts of vacancy. The report suggests, however, that space in these developments might not last for long, signalling that there’s still a strong demand for upscale offices.
Get the business news that matters, first. Subscribe to Vancouver Tech Journal.