{"id":20874,"date":"2022-11-15T10:10:00","date_gmt":"2022-11-15T18:10:00","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=20874"},"modified":"2022-11-08T11:12:23","modified_gmt":"2022-11-08T19:12:23","slug":"metro-vancouver-frenzied-commercial-market-normalizes-period-of-adjustment-underway","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2022\/11\/metro-vancouver-frenzied-commercial-market-normalizes-period-of-adjustment-underway\/","title":{"rendered":"Metro Vancouver Frenzied Commercial Market Normalizes, &#8220;Period of Adjustment&#8221; Underway"},"content":{"rendered":"<p style=\"text-align: justify;\">Metro Vancouver cap rates are rising for the first time in nearly a decade, but the future looks firm for both office and industrial space thanks to a shortage of new product in the region.<\/p>\n<p style=\"text-align: justify;\">\u201cWhile the near-term outlook is mixed, the underlying fundamentals of the Vancouver that have created resilience in the past still exist,\u201d Jason Kiselbach, senior vice-president and managing director of CBRE Ltd. in Vancouver said during the CBRE market outlook breakfast that served as the opening act for the Vancouver Real Estate Strategy and Leasing Conference on November 3. \u201cWe are currently going through a period of adjustment after an incredible run.\u201d<\/p>\n<p style=\"text-align: justify;\">The period of adjustment is bringing a slowdown in activity, even as demand in many respects remains strong. Deals are taking longer to do, for both vendors and landlords.<\/p>\n<p style=\"text-align: justify;\">\u201cWith flight-to-quality being the narrative for most office requirements, triple-A and A-class buildings appear to be outperforming the market and rental rates are holding steady,\u201d Kiselbach said.<\/p>\n<p style=\"text-align: justify;\">According to CBRE statistics released Oct. 3, Metro Vancouver office vacancies averaged 6.6% in the third quarter, with A-class space averaging 6.3%. Downtown office vacancies were slightly higher at 7.1% while A-class space averaged 6.7%. Suburban vacancies averaged 6.2%, with top-tier space 30 basis points lower.<\/p>\n<p style=\"text-align: justify;\">But the past month has seen office leasing activity moderate, with significant chunks of space returned to the market this fall.<\/p>\n<p style=\"text-align: justify;\">\u201cWe have added over 350,000 square feet of sublease product to the market since the start of September, with 50% of that product coming from three occupiers. We now have more sublease space on the market and a higher vacancy rate than during the pandemic, with the potential for more subleases to come,\u201d Kiselbach said. \u201cWe expect an increase in the vacancy rate over the next several quarters before reversing course.\u201d<\/p>\n<p style=\"text-align: justify;\">With the completion of The Stack at 1133 Melville Street, no major tranches of office space are expected to complete prior to 2025. This means existing vacancies will be all that\u2019s feeding demand.<\/p>\n<p style=\"text-align: justify;\">\u201cWith no new product delivering downtown or in the suburbs until 2025, any new absorption will work through existing product without a pile-on of new supply adding to the vacancy,\u201d Kiselbach said.<\/p>\n<p style=\"text-align: justify;\">A similar situation exists in the industrial market, where vacancies are running below 1% with very little new supply available. While demand for strata space has effectively stalled, demand for lease space continues in a market that remains among the tightest in North America.<\/p>\n<p style=\"text-align: justify;\">Overall availability in Metro Vancouver was 0.8% at the end of September with net rents averaging $20.67 a square foot. Completions added little more than 1% to the region\u2019s inventory.<\/p>\n<p style=\"text-align: justify;\">\u201cWe still foresee a continuation of the low-supply environment for the industrial market next year,\u201d Kiselbach said. \u201cWe expect vacancy to be at or below 1% in 2023. In regard to rental rates, we anticipate further growth based purely on the supply-demand imbalance.\u201d<\/p>\n<p style=\"text-align: justify;\">The strength of demand for industrial space was underscored by several speakers during the Vancouver Strategy and Leasing Conference. While there has been some retrenching following the frenzied activity of the past two years, lease rates continue to rise.<\/p>\n<p style=\"text-align: justify;\">\u201cThere was such a frantic race for space and people tied stuff up and actually converted on a lease without thinking the process all the way through,\u201d said Blake Asselstine, vice-president, leasing and asset management with Beedie Industrial. \u201cBut given where rates have gone in six months to a year, they\u2019re going to have no problem subleasing it.\u201d<\/p>\n<p style=\"text-align: justify;\">Irene Au, leasing director with QuadReal Property Group, also noted \u201cgood activity\u201d on Xchange Business Park, a 140-acre venture with Hungerford Properties in the works since 2018.<\/p>\n<p style=\"text-align: justify;\">\u201cWe couldn\u2019t build it fast enough, to be honest,\u201d she said.<\/p>\n<p><a href=\"https:\/\/biv.com\/article\/2022\/11\/metro-vancouver-real-estate-holds-its-ground-despite-challenges\" target=\"_blank\" rel=\"noopener\">Metro Vancouver Real Estate Holds Its Ground Despite Challenges<\/a> by Peter Mitham | Western Investor | BIV<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Metro Vancouver cap rates are rising for the first time in nearly a decade, but the future looks firm for both office and industrial space thanks to a shortage of &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2022\/11\/metro-vancouver-frenzied-commercial-market-normalizes-period-of-adjustment-underway\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-20874","post","type-post","status-publish","format-standard","hentry","category-market-updates"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Metro Vancouver Frenzied Commercial Market Normalizes, &quot;Period of Adjustment&quot; Underway &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2022\/11\/metro-vancouver-frenzied-commercial-market-normalizes-period-of-adjustment-underway\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Metro Vancouver Frenzied Commercial Market Normalizes, &quot;Period of Adjustment&quot; 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