By Tracey Arial
Almost four million square feet of new office construction is currently underway or proposed within downtown Vancouver and its surrounding suburbs. Almost all of the new space in the downtown core is pre-leased, but the suburban half won’t be so quickly absorbed, says Deloitte’s real estate director, Jennifer Podmore Russell.
The very short term and even medium term for Vancouver means that office product outside of the downtown core is going to be highly competitive for the next few years until we get to the point where demand can come back into equilibrium with supply,” she says.
Developers are creating the suburban office space in part to meet growth demand, but other projects are designed for current tenants who want to consolidate their operations.
We aren’t seeing a general trend of groups looking to move out to the suburban markets, but rather that they’re establishing secondary locations,” she said. “Deloitte would be a perfect example of that. In our taking 20,000 square feet in Langley, it didn’t shrink the footprint that we have in the downtown core but it did give us an opportunity to expand into suburban markets. If anything we are seeing a lot of major tenants looking for a space that will enable them to consolidate into one central office, whether that’s downtown or otherwise.”
Lots of the extra office development forms part of mixed-use projects on major transit lines. The office portion often gets added to meet the regulatory requirements of municipal jurisdictions with visions of local sustainable job growth.
If you look at the Skytrain lines you have major office developments occurring within Vancouver, Burnaby, proposed within Coquitlam, Surrey, Richmond, New Westminster, as well as more of the non-downtown locations of Vancouver along the Canada line or along one of the Skytrain lines,” she says. “There’s increased competition because there’s increased density coming in each one of those nodes.”
Unless new institutional users move into the marketplace or pension funds stabilize lease prices on new product, Podmore Russell believes that current trends could lead to a fragmented office market in Vancouver.
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