Vancouver’s downtown office market is seeing strong demand for top-tier Class-AAA space, but the launch of new developments in that category remains unlikely in the near term, according to local commercial real estate experts.
At a Commercial Real Estate Development Association (CREDA) event on Sept. 24, a panel of brokers and landlords outlined the current state of the market. Downtown vacancy for Class-AAA office space stands at 11.4 per cent, significantly lower than the 23 per cent vacancy rate for Class-C space and the overall 14 per cent vacancy rate for the city’s office market.
Limited AAA Inventory and Market Quiet
For tenants seeking AAA space larger than 50,000 square feet, only four options exist downtown, said Glenn Gardner, principal with Avison Young and moderator of the panel. Despite limited inventory, the leasing market has been very quiet, with reduced activity compared to the previous year.
“I just haven’t seen the level of inbound business calls at U.S. corporations looking for office space in Vancouver,” said Bart Corbett, vice chairman with Cushman and Wakefield. He noted that while tech companies once drove demand from 2014 to 2020, there has been little evidence of similar interest in the past 12 to 18 months.
Industry leaders pointed to the absence of major tech tenants as a key factor in the market’s sluggishness. Irene Au, vice president of leasing with QuadReal Property Group, emphasized that even when interest exists, the decision-making process remains slow, with prolonged delays between initial tours and final agreements.
Quality Drives Demand, Class-B Struggles
Demand for office space in Vancouver closely ties to building quality, according to Jeff Lim, vice president with BentallGreenOak. Meanwhile, Class-B market spaces of 5,000-10,000 sq. ft. have been hit hard and are the victim of the continued flight-to-quality, Lim said. “There’s no urgency,” Lim added, noting that Class-B markets have not seen such weak conditions since the 1990s. The trend reflects tenant preferences shifting toward newer, higher-quality facilities rather than older or mid-tier properties.
Suburban markets, however, show stronger performance with a 9.5 per cent vacancy rate. Transit-oriented hubs such as downtown Surrey, Brentwood Town Centre in Burnaby, and certain pockets of East Vancouver and Broadway remain particularly active, driven by residential and mixed-use developments rather than standalone office projects.
Suburbs Outperform with Mixed-Use Development
According to Au, suburban growth is fueled by broader development activity, where office buildings often serve as anchors within larger residential or commercial complexes. This contrasts with downtown Vancouver, where standalone office development remains constrained by limited available land and high capital requirements.
Mining and mining services have provided modest support for demand, while professional services firms continue to occupy space in QuadReal’s properties. However, the lack of tech sector interest—a major driver of Vancouver’s office market over the past decade—has left a notable gap in tenant demand.
For speculative office development to begin, Corbett explained, there must be viable sites for demolition and new construction, along with committed capital and an anchor tenant willing to wait years for completion. “There’s really only one or two sites that you can do that,” he said, questioning whether current owners have both the financial capacity and willingness to pursue such projects. “Before a shovel goes in the ground, I think it could be between four to six more years, if not longer,” Corbett added. Au echoed concerns about investor sentiment, noting that capital is being evaluated against opportunities in other cities and countries offering stronger returns.
