First-quarter data shows Vancouver's office and industrial markets registered another weak quarter highlighted by low leasing volumes and elevated vacancy. While office continued to largely tread water, industrial took a further breather. Both continuing trends seen through much of 2023. Like many office markets, Vancouver's office market is seeing little in the way of net new demand as companies respond to higher interest rates, more restrictive capital markets, and an increasingly uncertain economic landscape. Warehouse users are also being impacted by many of the same headwinds. With a generally higher cost of capital, many businesses appear to be putting the brakes on growth and expansion. With the prospect of lower interest rates, both office and industrial are expected to pick up later in the year, but any improvement needs be tempered by largely listless macro factors. Leasing activity was again noteworthy, with both office and industrial recording the fewest quarterly transactions on record (outside of COVID), down 7% and 33% respectively from year ago levels.
At quarter-end, the Metro Vancouver office availability rate increased 10 basis points (bps) to register 12.0% and was up 1.7 percentage points from a year ago. Meanwhile, the bellwether downtown market saw total available space dip slightly, finishing the quarter at 14.6%. Of note, downtown sublease space fell during the quarter, while direct space moved markedly higher. This, while the industrial availability rate increased by 20 bps to register 3.8%, a level last seen at the end of 2016. Office deliveries registered just 132,000 square feet, while industrial completions came in at 541,000 square feet. Just a quarter of the prior quarter. During the first quarter office rents fell by $1.00 per square foot to average $28.97 per square foot, while warehouse rents decreased slightly to $20.83 per square foot.