In the second quarter of 2014 the vacancy rates in Vancouver rose from 8.7 percent the 9.3 percent. Currently they are at the highest levels they have been since 2005. There are three things that have lead to these high vacancy rates. A lack of demand for office space, high office inventory and the slowdown that’s currently taking place in the mining industry.
Another reason for the spike in vacancy rates is the fact technology and digital media companies are looking for small, unique spaces. These are in very short supply. Those in the technology industry want office space in areas such as Railtown and Gastown. This is because they have a very distinctive look and feel. This contributes to the rising vacancy in Vancouver.
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The sad news is the vacancy rate is expected to continue to rise. As more lease deals expire and new office space hits the market this trend won’t be slowing down anytime soon. The new Burnaby’s Metrotower III only added to this problem. It is 411,000 square feet of inventory. The problem is only 111,000 is occupied. That leaves 300,000 square feet vacant.
There were two big lease deals that came through thanks to Sony Picture Imageworks and Microsoft. Both decided they wanted to expand into the city of Vancouver. That of course was a great thing for the city as it shows it is a growing hub for technology.
More good news would be the reports showing the natural resources sector is recovering. Because it is recovering more and more firms are looking for office space. That means the vacancy rates should slowly start to decline.
Right now British Columbia seems to be headed for a liquefied natural gas boom. As a result firms in the energy sector are looking for office space in the Vancouver area.
When you couple this with the fact landlords are doing all they can to get prospective tenants to move into their buildings, I think its safe to say things will start to pick up in the near future. There will still be high vacancy rates but they will slowly come down as the overall economy continues to recover.