A “substantial” number of office head leases in downtown Vancouver are not being renewed, which has kept the core office vacancy rate in double digits for the second quarter in a row.
“Head lease vacancy accounted for three-quarters of the total increase in vacant space downtown during [the second quarter] Q2 2023. This pattern was a result of occupiers waiting out their lease expiry before decommitting to office space,” according to a survey by commercial agency Avison Young.
The report, released June 28, said the downtown office vacancy rate was at 12.3 per cent in Q2 2022, up from 11.1 per cent in the first quarter of this year and from 9.4 per cent in Q4 2022.
“We expect this trend to continue,” Avison Young forecast.
The trend is leading some major office owners to look at options.
Rumours are swirling that Oxford Properties, and partners, are preparing to sell two downtown office towers: the nine-storey, 105,000-square-foot 402 Dunsmuir Street, which was custom-built for tech retail giant Amazon; and the 260,000-square foot 401 West Georgia Street, a fully leased tech tower renovated three years ago.
Meanwhile, Boffo Developments has submitted a proposal to have the vacant office space at its Smithe mixed-use office-residential tower on the eastern edge of downtown converted to hotel space.
The 30,000-square-foot office space that makes up the first three floors of the Smithe has been empty since the building opened two years ago at the corner of Smithe and Cambie Street. It is to be converted into a 36-room boutique hotel.
Avison Young reported that 3.1 million square feet of office space is vacant in the downtown and Yaletown areas, with 2.2 million of that traced to head leases and approximately 930,000 square feet in vacant sublease space.
When an office developer panel at the recent Real Estate Forum in Vancouver was asked how much leased space in Vancouver office towers was actually vacant – due to hybrid and remote workers – the consensus was at least 30 per cent.
