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Pacific Canada  + Office  | 
Aerial photo of downtown Vancouver office buildings.

Vancouver Office Tenants Hold Upper Hand for a Change

Vancouver’s office tenants are finding themselves in an unusually strong position when it comes to lease negotiations, according to recent reports from commercial real estate companies.

Colliers reported that the city’s office sector continues to favour tenants in a way not seen in more than 20 years.

Vancouver continues to outperform most North American office markets. The region’s office tenants have gained greater leverage as they navigate the uncertain market, which has been hard-hit in the post-pandemic era by such factors as the hybrid-work movement, companies and other organizations’ reduced space requirements and global economic conditions, among others.

Altus Group reported that Vancouver posted the lowest annual vacancy rate (13.2%) in Canada in 2024. According to Colliers, region’s office vacancy rate increased unexpectedly to 9.8% in the fourth quarter, but the market relatively 67,000 square feet of negative absorption during the period.

The downtown submarket posted an average vacancy rate of 11.6% in all of 2024 as the market favoured tenants throughout the year, said Colliers.

The flight-to-quality persists, with demand remaining high for premium office spaces, while older and lower-quality buildings continue to see negative absorption. This shift is creating a dynamic in which tenants are increasingly securing space in top-tier buildings, further solidifying their advantage.

Newmark’s latest quarterly Vancouver office report highlights tightening vacancy in both large suburban markets, such as Burnaby and Surrey, as well as in the downtown core. Vacancy and availability continued to stabilize in 2024 due to limited new supply in the pipeline, said the company.

“Class A buildings continued to benefit from tightening vacancy in 2024 due not only to an ongoing flight to quality, but also a flight to the newest class A buildings available,” Newmark reported. “Regional vacancy and availability rates are returning to pre-2017 levels, which are widely considered to be indicators of a healthy office market for both tenants and landlords.”

However, the stability sits below historical norms, as slower job growth has dampened organic demand.

Altus data reveals that Vancouver has the lowest class A vacancy rate in Canada at 12.7%. However, with limited class A space available in the coming years, the West Coast market could face challenges should demand continue to rise.

Newmarket has predicted that Vancouver will face a class A office shortage in the late 2020s due to the shortage of development projects currently in the pipeline.

“With new construction remaining largely at a standstill in downtown Vancouver, securing quality space will likely be a growing issue moving forward as tenants’ evolving needs remain unmet in obsolete class B-C buildings and the availability of class A space, particularly in new developments, continues to dwindle,” Andrew Petrozzi, Newmark’s head of Canadian research previously told Connect CRE Canada.

Consequently, it appears that tenants’ rare negotiating power may not last as long as they would like.

Photo: Shutterstock

 

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Inside The Story

Andrew PetrozziSusan Thompson

About Monte Stewart

Monte Stewart serves as Content Director - Canada for Connect Commercial Real Estate. Based in Vancouver, British Columbia, Monte provides daily news coverage of major Canadian commercial real estate markets, including Vancouver, Toronto, Montreal and Calgary. He has written about the real estate sector for various media outlets and Avison Young since the early 2000s. In addition, he has covered sports, general news and business for several leading wire services and publications, including The Canadian Press, The Associated Press, The Calgary Herald, The Globe and Mail, Research Money, The Daily Oil Bulletin, Natural Gas World and The Toronto Star. Monte is active in his community as a youth basketball coach and raises funds for such charitable causes as Movember.

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