Metro Vancouver Industrial Market
Since the last quarter, the Bank of Canada further reduced the interest rate on two occasions, totalling fifty basis points from 4.75% to 4.25% with potential reductions for the remainder of the year.*
Vancouver’s industrial market continues to stabilize with the regional vacancy rate increasing by 20 basis points to 3.0% while regional asking lease rates continue to decrease $20.03 per square foot. What is seemingly regarded as a tenants’ market with the relative abundance of availabilities, it remains to be seen how landlords will react to the downward pressure on their headlease rents to address the rise in competitive product in the market.
Despite the economic conditions facing the Vancouver industrial market, several significant sales still occurred. Of note is Translink’s acquisition of a two-building site for $85.6 million totalling 116,075 square feet near the Surrey Transit Centre at the northeast corner of 76th Avenue and 132nd Street. Notable completions include two mid-bay buildings at Beedie’s “The North Quad”, a multi-phase development in Surrey’s Campbell Heights submarket.
Metro Vancouver Office Market
The Vancouver office market experienced a mixed third quarter, with downtown vacancies stabilizing but suburban vacancies on the rise. Downtown Vancouver reported a vacancy rate of approximately 12%, driven by rising vacancies in Class B and C buildings. However, leasing activity is showing signs of improvement, with tenants gaining a clearer understanding of their space requirements. In a notable market transaction, Amazon completed its move to the South Tower at The Post on 745 Thurlow Street.
In contrast, suburban vacancies have increased in Q3. This shift reflects changing tenant preferences as companies re-evaluate their real estate needs in response to ongoing economic uncertainty. With new suburban developments underway and demand moderating, these areas are expected to remain under pressure in the coming months.
Despite these challenges, landlords continue to offer attractive incentives, such as tenant improvement packages, to entice new occupiers. Sublease options remain popular due to their lower costs and shorter lease terms, further intensifying competition. While the market remains a tenant’s market, some optimism is returning. Leasing volumes have picked up, and long-term commitments from major occupiers are beginning to stabilize vacancies, hinting that the market may be nearing the bottom of its cycle.
Metro Vancouver Retail Market
The Vancouver retail market continues to experience strong tenant demand coupled with limited availabilities. Significant tenant movement to note include Muji, a Japanese household goods retailer, closing its Guildford Town Centre shopping location vacating 15,800 square feet of two-floor space while Arc’teryx opened a new 4,199 square foot location in Coquitlam Centre.
Grocery, childcare and fitness tenants have been active in the Vancouver market, particularly along transit-adjacent development projects. This quarter, daycare tenants have secured leases throughout the region catering to and complementing the region’s overall growing population.
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* Note: At the time of publishing, a further 50 bps cut was implemented on October 23rd, 2024, lowering the policy rate to 3.75%. While this is a Q3 2024 market report, we felt it important to mention the largest rate cut since March 2020 as it significantly impacts current market dynamics and future outlooks.
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