With more office space going dark than being leased up, Vancouver is among Canadian markets vulnerable to a market correction, industry surveys suggest.
In its second quarter 2013 report, CBRE Ltd. noted that, for the past five years, high demand and low supply has driven downtown office vacancies lower in major Canadian cities.
"With 22 downtown office towers now under various stages of construction across the country, one has to wonder if the pendulum is beginning to swing too far in the opposite direction," said John O'Bryan, chairman of CBRE.
More than a million square feet of Canadian office space has been vacated in the first half of this year, CBRE noted, and 40 per cent of it is in Calgary and Vancouver, both of which are seeing a new cycle of Class A office construction. Vancouver now has 420,000 square feet of sublease space available downtown, said Colliers International.
Colliers also said a contraction in junior mining activity is among the reasons for a 4 per cent increase in sublease space in the past year.
Meanwhile, five new office towers have broken ground in Vancouver, with a total of 1.7 million square feet coming to market within the next three to four years. In the first half of 2013, however, negative absorption reached 106,000 square feet.
"When all of these factors combine, the downtown Vancouver office market should expect an interesting year in 2013," according to a Colliers research report.
- Glen Korstrom/BIV
From the Western Investor, August 2013
