Counterintuitive though it may seem, not only does Vancouver, at 6.2%, have the lowest office vacancy rate of all major North American cities, demand has been even stronger than it was before the COVID-19 pandemic.
Although traditionally more of a branch office than head office city, Vancouver saw major expansions in the years leading up to 2020, most notably involving Amazon and Microsoft, as well as growth from other American and Canadian companies. The city’s tech sector, in particular, has grown substantially thanks to its exceptional talent pool and the quality of life Vancouver is generally renowned for.
“BC and Vancouver have fared really well when compared to a lot of other jurisdictions for the last few years, and while certainly in 2020, as in everywhere else in the world, we saw a huge slowdown for office space, as soon as we rolled into January of this year we saw demand rise again,” Dan Jordan, a broker with Colliers in Vancouver, told STOREYS. “By summer 2021, we were back to pre-pandemic levels. Demand is a precursor for deals getting done, and we’re seeing significant transactions with more on the horizon.”
Although Jordan wouldn’t name names, he claims yet more major US-based players are eyeing either entry into the Vancouver market or to expand existing footprints.
In addition to tech firms, Vancouver’s broad professional services sector is also growing. Jordan says he’s never been busier with law firm clients than he has been in the last two years, and he anticipates demand will ramp up in 2022.
“They’re hiring a lot of lawyers and staff, and they want to go with the hybrid work model, but if they had everybody in the office there wouldn’t be enough desks,” Jordan said. “That’s only been this quarter; we expect 2022 to be exceptionally busy in Vancouver’s office market. We saw demand build this year and it translated into deals this summer, and we’ve since seen demand grow even more. We actually saw vacancies drop in our market from the second to the third quarter, and that’s the first time it dropped in the last 18 months. A lot of companies plan on returning to the office in the first quarter of next year—a lot planned to do it this fall but that was pushed back with the fourth wave of COVID, however, they’re planning on a return in Q1-2022.”
One sign that could be the case is a lot of companies have removed their offices from the sub-lease market, meaning the curtains could be drawing to a close on full-time remote work arrangements.
Vancouver’s commercial real estate market is so robust, in fact, that in mid-2020, just months after the pandemic struck, developer Wesbild decided to go ahead with a mixed-use industrial and office development called Marine Landing. Although the city’s white-hot industrial market is doubtless the lynchpin of the project, office units aren’t a mere throw-in, says Wesbild’s Development Manager Brennan Finley. However, Wesbild decided to target office tenants who would purchase units on a strata basis.
One way to make purchasing strata units easier is to reduce the square footage, Finley added, although he concedes that the strata office model was theretofore largely unproven and, resultantly, the benefits of building equity through non-residential property ownership was paramount to impart.
“Part of it was a big education piece, which we did through our marketing and sales program, but because of COVID, a lot of the office and industrial space do a hybrid work model, so they don’t need as much space as they previously needed,” he said. “A previous lease was 10,000 sq. ft. and now it’s in the neighbourhood of 6,000, which makes the strata model more attainable.”
Marine Landing, a development composed of two six-storey buildings located near a SkyTrain station, launched for sales to the public two months ago and, perhaps unlike typical commercial developments, included inducements.
“We took a big stance on providing amenities: there’s a rooftop patio, bocce ball, a BBQ, a common lounger and bookable meeting rooms, so all of that played into offering buyers a big amenity package that is especially important when you’re going in to purchase. It’s like buying a condo -- you want to see that amenity package, so it was a similar idea.”