Demand for the construction of a new trophy-class office tower in downtown Vancouver is gaining momentum, says Newmark’s head of Canadian market research.

Andrew Petrozzi told Connect that the supply of class A spaces spanning 50,000 square feet or more is becoming increasingly tight in both the core and the suburbs even though downtown vacancy has stayed in the 11% to 12% range for the past two years.

“Other than a couple of sublease opportunities which have come up, there’s not a whole lot of options there,” said Petrozzi. “As companies are looking around, that will lead to increased pressure for someone to make an announcement regarding [the] kicking off of new supply.”

Petrozzi expects downtown vacancy to hover in the 10% range in 2026 as tenants show a clear preference for class A spaces both downtown and in the suburbs, where there a fewer of them now that towers built in recent years have leased up. He anticipates that additional downward pressure on vacancy will trigger the construction of a new downtown tower as suburban availabilities continue to decrease.

“Any new supply isn’t going to even if it started tomorrow, or, let’s say even early 2026 isn’t going to be ready until 2029, 2030. That’s a long time,” said Petrozzi, pointing to another reason why a new downtown tower could be launched soon.

The growing return-to-office movement in multiple industries, including the finance sector, albeit to a lesser degree than in Toronto, is also creating more demand and incentive for a new tower, he added.

He pointed to notable office acquisitions in the downtown and Gastown district, located just north of the core, as signs of this year as strong ongoing downtown demand indicators.

In November, QuadReal Properties sold The Post, an iconic downtown mixed-use office tower completed in recent years and anchored by Amazon to Spanish billionaire Amancio Ortega for a reported price of $1.1 billion, the highest total ever received for a single Vancouver office property.

Also in November, Upfield Capital purchased a 23,000-sf Gastown heritage office and retail building from Allied REIT for $10.7 million. In August, Kingsett Capital acquired twin downtown towers from Cadillac Fairview and the Investment Management Corporation of Ontario for a reported $125 million. Although Cadillac Fairview tends to be known for its retail properties, it still has a large downtown Vancouver office portfolio following the sale.

During the summer, Oxford bought its partner, the Canada Pension Plan Investment Board, out of four downtown towers, including The Stack, Canada’s first net-zero office property. Oxford acquired the four Vancouver towers as part of a larger $730-million Western Canadian portfolio purchase whereby the company gained full ownership of seven major office properties after holding 50% stakes with CPPIB.

“You’re seeing a lot of investment going into downtown Vancouver,” said Petrozzi. “Clearly, investors do see a strong, bright future downtown.”

Petrozzi made the comments following Newmark’s release of its third-quarter Metro Vancouver office report, which he authored. According to the report, higher rents must be achieved before a new downtown tower can be launched.

Newmark’s research found that Greater Vancouver is still among still among the tightest office markets in North America, the company says.

The region’s office vacancy and availability remained stable in the third quarter as no new downtown projects launched and there was modest new supply in the development pipeline.

Achievable rents must improve notably before investors are willing to support the first new down tower’s construction, according to Newmark.

The report states that stabilized vacancy in such suburbs as Burnaby and Surrey combined with tightening vacancy on the outskirts of Vancouver’s city limits offset rising vacancy in the Broadway corridor and downtown.

The Broadway corridor is expected to see considerable investment and development demand due to a future SkyTrain extension, in the form of a subway line, from Broadway and Cambie Street to UBC. But potential new investments and projects have been hampered by the city’s moratorium on rezoning along the Broadway corridor between 2018 and 2022 until a new official area plan was approved in 2024, along with the subway line construction now underway, Petrozzi told.

The Broadway corridor has numerous B and C class office properties that are experiencing low leasing demand. Petrozzi anticipates that some office investments and developments could begin after the future subway line is built.

“I’m not 100% sure how much of it will be office,” he said, noting that most new projects along Broadway have tended to be multi-residential.

But Petrozzi is certain that the subway line’s completion will encourage the area’s property owners to examine their uses and prompt developers to look at sites that may be suitable for office projects.

Some B and C class office assets along Broadway could be redeveloped or repurposed, he added.

Canadian-American trade tensions continue to make office occupiers wary, according to Newmark.

Photo: Courtesy of Newmark