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Is There a Distinctly “Vancouver” Watch?
Not since John F. Kennedy have people been more preoccupied with a demise until COVID-19 came along and, according to popular theory, held up a two-barrel shotgun to the modern office and pulled the trigger.
The pandemic means more people than ever are working from home, and when they seem perfectly able to do so, it’s called into question the viability of leasing out vast amounts of retail space in order to house employees. Of course, you’ll also find scores of editorials and opinion pieces musing about how the death of the office has been “greatly exaggerated.”
When it comes to Vancouver, which is true? Maybe both.
The city’s downtown office vacancy rate rose to 4.6 percent in the third quarter of 2020, a 1.3 percent bump, according to real estate firm CBRE. The overall rate hit 5 percent; the first time the city had hit that mark since 2018. In the fourth quarter, the trend continued—downtown vacancy hit a 5.8 percent mark while the overall rate was 6.2 percent.
That downtown rate is the lowest among major urban centres in North America, according to CBRE. Toronto, at 7.2, is the next closest, but Canadian cities like Montreal and Ottawa were around 10 percent while Edmonton and Calgary hovered the 20 percent mark.
The red flag, though, is the fact that corporate subleases have become commonplace in Vancouver in the last few months, to the tune of some 900,000 square feet in the city’s downtown. Compared to some bigger metropolises, that might feel like a drop in the bucket—New York City had around 450 million square feet on the market— but it accounts for more than half of the current vacancy rate in Vancouver.
“There was so much pressure on organizations that they had to find a way to mitigate that, but even more so, they were and are trying to adjudicate what remote work looks like long term,” recalls Colliers associate vice president Peter Muench of those early days of the pandemic. Muench specializes in securing commercial space for Vancouver-based tech companies.
“You had people saying everything from, ‘We’re never going to go back to the office again,’ to ‘You’ll go back to the office, but it’ll be a modified pandemic-style office, the open office is dead.’”
For some truth behind the proverbs, Muench prefers to look at actions instead of words. “Facebook came out in May and said they were going to be a remote work company in perpetuity, and staff wouldn’t have to come into the office,” he says. “The result was that you had a bunch of people say, ‘Well I’ll move to Wyoming,’ and so Facebook said they’d adjust your compensation package downwards if you’re not in a high cost area like the Bay Area.”
The company also leased 730,000 square feet of office space in Manhattan and bought outdoor retailer REI’s former headquarters in Seattle for $367 million.
“What does that tell me?” Muench asks. “That the organizations that know best how we’re spending our time at home—companies like Facebook and Google—aren’t eschewing the office. They might be taking a public position about it, but they’re making physical commitments contradictory to that.”
In this city, examples of both strategies are there for the picking. For every Shopify—which came to Vancouver and leased a brand new office, only to pledge that remote work is the future—there’s an Amazon, which hopes to eventually house 8,000 people between two downtown offices.
“It all leads me to believe that long-term, something like remote work is a tool, it’s not the bedrock,” says Muench.