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Vancouver office market struggling as vacancies rise, construction dives

Vacancy rate hits 9.7%, second straight quarter of increase
More developers are considering converting office towers to hotel or residential projects midway through construction, according to July 2 report from CBRE.

Metro Vancouver office vacancies are continuing to tick upwards as developers consider shifting their priorities mid-construction to hotels or residential.

The region’s overall office vacancy rate rose to 9.7 per cent in the second quarter of 2024, according to a new report from real estate services firm CBRE.

This marks the second consecutive quarter vacancies have gone up across Metro Vancouver.

Split between Vancouver’s downtown and the surrounding suburbs, the former is struggling more with a vacancy rate of 10.8 per cent. The office vacancy rate in the suburbs landed at 8.4 per cent last quarter.

And it was more bad news in terms of the construction pipeline.

The first quarter saw 6.2 million square feet of space under development.

But by the second quarter, this figure dropped to 1.1 million square feet, “with no major commencements and a growing interest in office conversions to other uses with some new developments shifting mid-construction to either residential or hotel,” the July 2 report stated.

Toronto was the only other city with more than 1 million square feet of space under development. While most of Toronto’s construction was in the city’s downtown, Metro Vancouver’s construction was almost entirely in the suburbs.

Nationally, construction hit its lowest levels since 2005, falling to 5.7 million square feet in the second quarter of 2024.

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Updated July 11, 2024, to clarify figures for broader construction rather than specific office construction.