Renting office space in downtown Vancouver is more expensive than in any other city in Canada, according to Colliers | Chung Chow, BIV
Big tech companies aren’t giving Vancouver’s downtown office towers much breathing room.
The city’s downtown office vacancy rate hit 7.4 per cent in the second quarter of this year – up slightly from 7.2 per cent in the first quarter of 2022, according to a report released Wednesday by Colliers International Canada.
Only Victoria has a lower downtown office vacancy rate at 6.1 per cent.
Venture into the suburbs and office space in even scarcer, with communities outside Vancouver proper facing an office vacancy rate of 4.9 per cent. Overall, Metro Vancouver has an office vacancy rate of 5.9 per cent as of the second quarter.
Big tech companies are driving demand in the city’s office market, a Colliers representative said in an email to BIV.
Large tenants taking up 50,000 square feet or more are the most active tenants. But they face an ever-diminishing number of options even as remote and hybrid working models have taken off in the pandemic at the same time employers are looking for ways to accommodate workers in a tight labour market.
“Low operating costs contribute to Vancouver’s allure as a tech hub. Vancouver had the fourth-lowest operating costs of the 30 top tech markets identified by CBRE [Group Inc.],” stated an April report from the Downtown Vancouver Business Improvement Association (DVBIA), referring to rankings from the real estate services firm.
“The recent increase in investment from U.S.- based venture capital firms is linked to increases in remote work, with VC firms increasing their investments in Canada-based companies now that geographic proximity is less of a limitation.”
So even though the rise of remote working might lead one to believe that office space would be in less demand, big U.S. tech companies appear to be growing more comfortable tapping workers based in Vancouver offices to exploit lower operating costs.
Vancouver-founded PlentyOfFish (now owned by Match Group), fintech Tipalti Inc., medical devices firm Masimo Corp. (Nasdaq:MASI) and Microsoft Corp. (Nasdaq:MSFT) are among the American tech companies that have been expanding downtown over the past year.
And homegrown tech firms that recently reached unicorn status (a valuation of US$1 billion or more) also have a foothold in the city’s downtown core, including Trulioo Information Services Inc., GeoComply Solutions Inc. and Galvanize.
But companies are paying a premium to expand in Metro Vancouver, where the cost of office space per square foot sits at $32.90, according to Colliers’ data.
Only Toronto, at $26.06, even comes close to Vancouver. The net asking rate for office rent in Calgary stands at $14.15.