Premium office space remains a hot commodity in Vancouver.
That’s according to a Monday report from Avison Young (Canada Inc.), which found trophy offices remain in high demand as overall sublease vacancy rates have been nearly cut in half from record highs in 2023.
The global commercial real estate advisor said the Vancouver office market has expanded by nearly 3.8 million square feet since early 2020, marking the largest development surge in a decade.
This resulted in Vancouver’s downtown vacancy rate dropping to 15.3 per cent in the first quarter of 2025, a notable decline from the previous high of 27 per cent in the second quarter of 2023.
The availability rate of AAA office space was even lower, dropping from 15.1 per cent to 12.2 per cent year-over-year, which the report said demonstrates tenants’ preference for premium office environments.
“Fundamentally there has been a shift from the employer’s standpoint on the type of space that they want to deliver to their employees, and that space is higher quality with better amenities in the newer building and it helps get employees back into the office”, Glenn Gardner, principal at Avison Young told the Western Investor.
Meanwhile, the report found residential conversions to be more prevalent in other Canadian markets than in Vancouver.
“One notable example is 1111 West Hastings Street, recently acquired by Reliance Properties and Germain Hotels for conversion into a hotel, to be opened in 2029. … The property benefits from land-use regulations that permit hotel development without requiring rezoning,” the Avison Young report said.
“With several other high-vacancy office buildings also falling under this designation, more conversions could follow.”
While the Bank of Canada implemented five interest rate cuts in 2024 – reducing its key interest rate by 175 basis points last year alone – the report said U.S. tariffs on Canadian goods has created uncertainty, with tariffs expected to drive up construction costs for new developments.
