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Exclusive JLL index forecasts a movement to nearly full occupancy in city’s trophy towers before new buildings are delivered
VANCOUVER, Feb. 7, 2013 — Jones Lang LaSalle’s second annual Blue Chip Building Index (BCBI), a barometer of the leasing environment in Vancouver’s Central Business District (CBD), reveals that the combined average vacancy rate of the city’s 20 most prestigious office towers has dropped to 1.1 percent – an almost 50 percent decline from the inaugural BCBI in 2011. According to the proprietary index, low vacancy combined with ongoing strong demand (1.6 million square feet of tenants currently represented in the market) may push the city’s trophy towers closer to full occupancy before new supply provides new options for tenants.
“The scarcity of space options in the city’s top 20 office buildings, and across the CBD as a whole, presents an even bigger challenge for tenants than a year ago,” said Gavin Reynolds, Senior Vice President in JLL’s Vancouver office. “To deal in this market requires the sourcing of creative solutions for tenants. Last month, we completed three lease transactions totaling 63,000 square feet that were not marketed (grey space) and will never be factored into vacancy rates.”
Vancouver’s BCBI vacancy rate among the lowest in CanadaThe 20 premier office buildings featured in the BCBI were selected based on criteria such as location, amenities, green standards, floor plate size, access to public transportation and building age.
According to the Blue Chip Building Index:
In addition to the limited supply in Vancouver’s 20 trophy office towers, the vacancy rate remains low in the remaining Downtown buildings (4.4 percent).
“Due to tight supply in BCBI and other Downtown buildings, the larger tenants need to begin evaluating their options several years in advance of their lease expirations,” said Reynolds. “With the shortage of available space Downtown, renewing current leases or relocating outside the CBD are among the most viable, although not necessarily ideal options for tenants. The current conditions have triggered several early renewals in BCBI buildings and amplified pressure to do more with fewer square feet. Despite the low vacancy in the Index, global economic volatility and the increasing number of mergers and acquisitions have led to an abundance of grey market opportunities for Downtown A class tenants.”
On the horizon: expanding options for tenantsWhen will market conditions begin shifting in tenants’ favour? The Index suggests that the leasing environment will improve leading up to 2015, when several companies with leases of 50,000 square feet and higher will move into newly completed towers such as TELUS Garden, MNP Tower and 745 Thurlow. The confirmed projects are approximately 43 percent pre-leased, and large users are already beginning to take advantage of the opportunity to lease space that will be vacated by tenants scheduled to move into the new crop of buildings.
“In addition to the availability of space in the city’s new developments, backfill opportunities will open up for tenants seeking space Downtown,” said Reynolds. “With the strong pre-leasing activity at downtown projects currently under construction, we expect space in the newly-opened towers to be absorbed in a timely manner. With this activity, we are already seeing a movement away from the current landlord-favourable environment as options begin to expand for tenants.”
See the Index for further details, including a list of the 20 BCBI buildings, information on upcoming tenant relocations, and comprehensive leasing and inventory data.
About Jones Lang LaSalleJones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet. Its investment management business, LaSalle Investment Management, has $47.0 billion of real estate assets under management. For further information, visit www.jll.com.
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