Downtown Vancouver Rents Rise Sharply In Five Years: Report
Average rents for downtown Vancouver’s top-tier offices have increased about 43 per cent over the past five years, including 6.1 per cent in 2011, according to a new report by Colliers International.
However, don’t tell that to the president of Wyllie & Norrish Rock Engineers, who hasn’t seen his rent rise in several years and feels he’s getting a good deal with just a 15-minute walk to the city’s central business district.
“I pay $900 a month for the office and $135 for a parking space,” said Duncan Wyllie of his 170-square-foot office in the Viva Tower, 1311 Howe, where he’s been for 12 years. “It’s $5.36 per square foot per month [and] it hasn’t gone up in five years.”
Wyllie, who said his building at Howe and Drake has about eight floors of offices with a very diverse group of tenants, looked at renting a similarly-sized space in downtown Vancouver’s north end but found it too pricey.
“I’m happy here, but I’d like to be right in the core. But I can’t afford it.
“It’s a bit of a compromise, about a 15-minute walk to downtown [but] there’s some pretty good deals.
“If I looked further downtown, the rent would probably be 50 per cent more,” added Wyllie, noting that his total rent, which works out to about $64 per square foot per year, includes a receptionist, some furniture, a gym, a coffee room with coffee, a reception room, office equipment and other operating amenities. “If [rent] went up [here] by 43 per cent, there’d be a mass walkout.”
The Colliers report said the average vacancy rate increased slightly from 7.2 to 7.4 per cent in the fourth quarter of 2011, primarily because of new supply entering a market that’s expected to boom over the next several years, with the construction of several new office towers.
“It is evident that downtown Vancouver rental rates have not only increased noticeably in the past year, but that sizable increases have taken place over the last five years,” Colliers’ Metro Vancouver Market Overview concluded.
“Downtown tenants are finding it very difficult to come to the realization that they may have to renew their spaces at nearly 50 per cent higher than they paid five years ago.”
High downtown rents have sparked a surge of interest in suburban office options, particularly Burnaby, the report added.
“While rates have increased by an average of 30 per cent over the past five years in Burnaby, the increase is still less severe than in downtown. Furthermore, rental rates for downtown quality spaces are typically 50 per cent higher than rates for equivalent spaces in Burnaby.”
Of that, the report said that the average net effective rent (NER) — the contract rental rate adjusted for free rent and allowances — per square foot for Class AAA offices in downtown Vancouver increased 43.1 per cent over five years from $23.70 in 2006 to $33.92 in 2011. For Class A offices, rents increased 38.3 per cent over the same period to $29.88, Class B 41.5 per cent to $22.38, and Class C 48.7 per cent to $17.53.
Unlike Wyllie’s office, the rates cited in the Colliers report were for basic rent and did not include staffing, operating costs, taxes and other amenities which can be considerable.
The Colliers report also concluded that the Metro Vancouver office market remained very stable throughout 2011.
“Each quarter posted positive net absorption, totalling an impressive 476,986 square feet for the entire year. This is particularly noteworthy as it is the largest amount of net absorption since 2007, indicating that the Metro Vancouver office market is steadily on its way to regaining pre-recession numbers.”
It said that the vacancy rate increased due to 184,085 square feet of new supply being added to the inventory, with over 89,000 square feet of Class A new supply added to the downtown inventory in the fourth quarter, including The Offices at Hotel Georgia and two floors of office space in The Beasley.
“Of this new supply, over 60,000 square feet was absorbed, primarily by The College of Physicians and Surgeons.”
Two upcoming downtown office buildings made notable progress, with 1021 West Hastings officially breaking ground and 745 Thurlow securing SNC-Lavalin as a tenant, the report added.
Other proposed downtown office buildings awaiting approval on their rezoning applications include Burrard Gateway, The Exchange, and Manulife’s building.
The report forecast that the downtown Vancouver office market will remain stable throughout the first half of 2012, with vacancy rates likely to decrease minimally in the next six months.
A Colliers representative could not be reached Monday for comment on the report.