Avison Young releases Year-End 2011 Metro Vancouver Office Market Report
VANCOUVER, Jan. 25, 2012 /CNW/ - Positive absorption, tightening vacancy
and a lack of new Downtown office product kicked off Vancouver's next
development cycle in 2011 while select suburban markets - despite some
signs of improvement - continued to demonstrate lingering weakness amid
ongoing global economic concerns.
These are some of the key trends noted in Avison Young's Year-End 2011 Metro Vancouver Office Market Report, released today. The semi-annual survey covers vacancy, absorption and
new construction trends in the Downtown, Yaletown, Broadway, Burnaby,
Richmond, Surrey, New Westminster and North Shore submarkets, which
total 46.4 million square feet (msf) of office space.
The region witnessed positive annual absorption in 2011. The net change
in occupied office space between January 1 and December 31, 2011 was
532,275 sf - an improvement on the positive annual absorption of
246,777 sf that occurred during 2010. Five of the eight submarkets
experienced positive annual absorption in 2011, a similar result to
2010. The Downtown submarket led the way in 2011 with 373,425 sf of
positive absorption followed by Burnaby (212,072 sf). Yaletown,
Broadway and Richmond also enjoyed positive absorption during the year.
The overall Metro Vancouver vacancy rate declined in 2011, dropping to
7.4% from 8.4% at year-end 2010. Five submarkets (Downtown, Yaletown,
Broadway, Burnaby and Richmond) saw vacancy rates decline in 2011,
while vacancy on the North Shore held steady on a year-over-year basis.
"This year marks the start of something remarkable in the Metro
Vancouver office market," comments Michael Keenan, Senior Vice-President and Managing Director of Avison Young's
"With three significant projects starting construction Downtown and at
least four others in the planning stages - along with new projects
going forward in the Broadway, Burnaby, New Westminster and North Shore
submarkets - Metro Vancouver's office market is embarking on one of the
most substantial expansions the region has witnessed in decades."
According to Avison Young Downtown office leasing advisor Glenn Gardner, vacancy in the Downtown core continues to tighten in all property
classes with vacancy in the single digits at year-end 2011 as deal
volume picked up during the second half of 2011.
"The majority of reported notable deals during the last half of the year
were renewals," he says. "This is likely a reflection of the supply
constraints prevailing in the market. With class AAA vacancy virtually
nonexistent and class A premises at 3.3%, there are very few options
for tenants considering relocation or expansion in the Downtown core.
Even class B vacancy is less than 5%. New construction will unlock
currently unrealized demand and provide for a more balanced market."
The overall Downtown office market remains tight with only 3.9% vacant
at year-end 2011, a steep decline from 5.2% at year-end 2010. Vacancy
in class AAA premises contracted from 3.9% at year-end 2010 to only 1%
unoccupied. If the space availability factor (SAF) is taken into
consideration, Downtown's effective availability rate is currently
6.5%, down from 7.1% at year-end 2010. (SAF refers to head lease or sublease space that is being marketed but is
not physically vacant, or new supply that is nearing completion and
available for lease.)
Burnaby continued to witness positive gains in 2011 with vacancy levels
continuing to decline year over year from 13.2% at year-end 2010 to
10.6% at the close of 2011. Strong positive annual absorption of more
than 212,000 sf demonstrated the resilience in the submarket as it
rebounds despite ongoing global economic turmoil. Posting positive
annual absorption for the first time since 2007, Richmond saw its
vacancy rate dip to 23.3% from 24.6% at year-end 2010. While Richmond
still has the highest vacancy rate in Metro Vancouver, declining
vacancy and positive annual absorption in 2011 could mark a reversal of
fortune for the long-suffering submarket. The overall suburban vacancy
rate in Metro Vancouver increased slightly to 10.6%.
"A stabilized economic outlook and improving business climate has
stimulated demand as demonstrated by the positive absorption
experienced in most suburban markets," adds Avison Young Principal Bill Elliott. "Not only has the Richmond submarket swung to positive annual
absorption for the first time since 2007, but Burnaby witnessed the
lease-up of almost 415,000 sf of class A office space."
He continues: "With limited options in the Downtown core and the
improved prospects of many suburban-based businesses, the resurgence in
demand for office space in Metro Vancouver's large inner suburbs bodes
well for the overall market and has triggered a new development cycle
in its own right. Ivanhoe Cambridge is pursuing construction of
Metrotower III in Burnaby and there appears to be impetus behind
getting Sea Island Business Park in Richmond off the ground. Both of
these projects had been biding their time and are now seeing 2012 as
the year to move forward."
Sublease vacancy continues to decline throughout the majority of the
region. As of year-end 2011, 299,773 sf of vacant sublease space
remained, down from 476,210 sf at year-end 2010. Vacant sublease space
now represents only 8.7% of Metro Vancouver's total vacancy. A lack of
new supply and increased demand have pushed sublease vacancy to its
lowest point since Avison Young began tracking the region in 1997.
Less than 150,000 sf of new product was added in 2011 to the Metro
Vancouver office inventory. Jameson House and the Offices at Hotel Georgia provided 131,500 sf in the Downtown core, while The Beasley provided 18,000 sf in Yaletown. Additional projects in Surrey and
Yaletown originally anticipated to complete in 2011 were subsequently
pushed to 2012. There is no new product anticipated for Downtown until
mid-2014 at the earliest.
Three new Downtown office towers to break ground in 2012:
Positive Downtown absorption of 373,425 sf in 2011 marks a significant
improvement over the positive annual absorption of 53,846 sf just 12
months earlier. Many tenants chose to renew in light of the lack of new
supply coming on stream in Downtown Vancouver in the next 30 months.
Bentall Kennedy, Westbank Projects and Oxford Properties have announced three significant office tower developments (745 Thurlow,
Telus Garden and 1021 West Hastings, respectively) that will offer more than 1.1 msf
of office space when completed. Oxford and Westbank have indicated that
their respective projects would come on stream by mid-to-late 2014,
while Bentall Kennedy has indicated its development would finish by the
fall of 2015.
Gardner notes: "With these new prelease opportunities available, tenants
have more options when it comes to relocating or expanding in the
Downtown core. There is a palpable sense of enthusiasm around the
positive indicators emerging in the Downtown core; and these new
buildings, along with those that are being proposed, add much needed
new product and further build the anticipation."
Other proposed office developments include Jim Pattison Developments/Reliance Properties' Burrard Gateway, and Aquilini Development and Construction's proposed office tower adjacent to Rogers Arena. Manulife Financial and Credit Suisse AG have also emerged in recent months with proposals for additional office
tower developments in the Downtown core.
The impact of these new developments on the Downtown vacancy rate is
explored in greater detail in the report, which contains a forecast
model examining three potential absorption scenarios out to 2015 and
highlights the potential impact new and proposed construction would
have in each scenario.
Keenan adds: "This exercise in forecast modelling comes at a time when
the Vancouver skyline is about to undergo a radical transformation and
the Downtown core prepares for the largest expansion of office space in
decades. By gaining an understanding now of how these new buildings
will potentially impact Downtown market fundamentals by 2015, we are
better able to inform tenants and landlords and, ultimately, provide a
road map to illustrate possible courses of action."
Founded in 1978, Avison Young is Canada's largest independently-owned
commercial real estate services company. Headquartered in Toronto,
Ontario, Avison Young is also the largest Canadian-owned,
principal-managed commercial real estate brokerage firm in North
America. Comprising more than 800 real estate professionals in 26
offices across Canada and the U.S., the full-service commercial real
estate company provides value-added, client-centric investment sales,
leasing, advisory, management, financing and mortgage placement
services to owners and occupiers of office, retail, industrial and
Editors/Real Estate Reporters
SOURCE Avison Young (Canada) Inc.
For further information:
For further info/comment/photos:
- Andrew Petrozzi, Research Manager, Metro Vancouver, Avison Young: (604) 646-8392
- Michael Keenan, Senior Vice-President and Managing Director, Vancouver, Avison Young: (604) 647-5081
- Glenn Gardner, Advisor, Avison Young: (604) 647-5092
- Bill Elliott, Principal, Avison Young: (604) 647-5062
- Sherry Quan, National Director of Communications & Media Relations, Avison Young: (604) 647-5098; cell: (604) 726-0959
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