Office Update

Office Rents Hit a High

Derrick Penner
Vancouver Sun
Tuesday, April 17, 2007

Downtown Vancouver office rents are now at a record high, a major commercial realtor reports, with still-high demand meeting ever-shrinking supply.
Vacancy in Vancouver's core is hovering between 3.1 per cent and 4.1 per cent, according to estimates of two major commercial realtors, and the province's economy keeps humming along at a better-than-average clip.
So rents for all classes of office space have climbed as much as 30 per cent over the past two years, with Class-A rates hitting an average of $23.90-per-square-foot per year, the second highest lease rate in Canada after Calgary, commercial realtor CB Richard Ellis reported in its first-quarter assessment of the Vancouver office market.

CB Richard Ellis said Class-AAA rents, of which there are only a few buildings in the city, are hitting an average of $30.95 per square foot, with some landlords receiving over $40 per square foot for prime-view spots.
"It continues to get tighter downtown," Chris Clibbon, a senior analyst at CB Richard Ellis, said in an interview.
"Vacancy has been lower before, at the height of the tech boom," Clibbon added, "but rents are as high as they've ever been in downtown Vancouver."

Between the estimates of two major commercial realtors, CB Richard Ellis and Colliers International, downtown office vacancy hovers between a high of 4.1 per cent and a low of 3.1 per cent.
Clibbon said he anticipates downtown's vacancy will continue to be squeezed down, his estimate is to 3.5 per cent from his current projection of 4.1 per cent, as tenants of recently signed leases occupy their space.
And there is still little new supply officially on the books, although the City of Vancouver said it is in pre-application discussions with three potential developers.

Only the Jameson House, a primarily residential tower on West Hastings street, includes about 55,000 square feet of office space which should come on stream by the summer of 2010.
Clibbon added that in previous office-market cycles, some developer would have had a new office project on the books with vacancies this low.

"We don't have that scenario, [so] this is an exceptional period in the office market cycle," he said.
The big push to build new offices is still out in the suburbs, with CB Richard Ellis counting some 2.6 million square feet of new office space under construction, in planning or pre-planning phases.
However, rents in the new suburban office complexes are approaching the highs of downtown Vancouver's lease rates, particularly in Burnaby.

RENTS AT THE TOP

High demand and lack of supply have pushed downtown Vancouver rents to levels never seen before, and second to only high-flying Calgary. Below are some examples of the price for Class-A space (per square foot):

Downtown $23.90
Broadway corridor $17.63
Burnaby $18.23
Richmond $13.96
North Shore $19.02
Surrey $18.25
New Westminster $18.25