As Vancouver’s commercial real estate (CRE) market heads into 2025, there’s cautious optimism on the horizon. Despite economic adjustments and sector-specific challenges, renewed investor confidence and promising trends in key areas signal brighter prospects ahead.
At CBRE’s Vancouver Market Outlook event on November 7, CBRE Vancouver Managing Director Jason Kiselbach outlined a nuanced yet hopeful forecast:
“Overall, we are heading in the right direction and expect more positive news in 2025.”
Here’s a closer look at the key insights shaping Vancouver’s CRE landscape:
Office Market Stabilizes
The downtown office market, with a vacancy rate between 11-12%, has struggled in recent years, but signs of recovery are emerging. Tenant demand is diversifying, with industries such as engineering, legal, business services, and tech driving renewed interest. Notably, CBRE is tracking nearly 800,000 square feet of downtown office space requirements.
Larger occupiers are committing to long-term leases again, with 70% of transactions in the past two years exceeding five-year terms. This marks a return of stability and confidence in office real estate, particularly among medium and large tenants.
Industrial Sector Faces Adjustments
Vancouver’s industrial market, once defined by extremely tight supply, is undergoing a period of adjustment. An influx of new developments has pushed availability rates higher, with 2024 recording the lowest pre-leasing activity in seven years.
While demand has cooled slightly, modern industrial facilities remain a strong asset class, driven by logistical needs and innovation in property design.
Retail Thrives Amid Economic Shifts
Retail in Metro Vancouver remains robust, buoyed by population growth, tourism, and steady consumer spending across various sectors. Prime locations and well-known brands continue to thrive, particularly in major retail corridors and suburban grocery-anchored developments.
However, rising economic pressures could challenge retailers in non-essential or luxury segments. Retail construction has slowed, a trend expected to persist into 2025.
Multifamily Market: Resilient but Softening
With a vacancy rate below 1%, Vancouver’s multifamily market remains one of the tightest in North America. However, rental rates are beginning to soften. Potential reasons include shifts in population dynamics, economic headwinds, and the financial limits of renters in the region. Developers and investors are closely watching these trends as they plan for 2025.
Investment Sales Show Signs of Recovery
Investment sales in Vancouver are gaining momentum after a subdued 2023. The total value of commercial properties traded in 2024 is up 5% compared to the five-year average, with land, industrial, and retail assets leading the charge.
High-profile transactions, such as the largest office sale in five years and a record-breaking industrial land deal, reflect growing confidence among institutional investors. Multifamily and industrial sectors are expected to see significant institutional activity in the coming year.
Development Land Faces Headwinds
Development land remains a challenging sector, particularly for residential and mixed-use projects. Rising construction and financing costs, coupled with reduced project revenues, have dampened demand. Distressed sales accounted for 13% of residential land transactions in the first half of 2024, a trend expected to continue through early 2025.
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