At first glance, downtown Vancouver appears a beehive of activity, with multiple highrises being constructed, condos being built, and rezoning applications dotting the landscape. If you gauged the city on first appearances, you’d surely think the city was growing by leaps, but your first glance would overlook the truth, which is that Vancouver is for lease.
Walk down any street in Vancouver’s business, shopping, or entertainment districts and there’s one thing you’ll see a lot of, for lease signs. They’re on commercial buildings, retail developments, and entire floors can be had in numerous buildings. Currently, the vacancy rate is approaching 10%, an extremely high level for Vancouver, and it’s going to rise, because for some odd reason, new buildings are going up everywhere.
Ask a commercial agent(who’s honest), and he’ll tell you companies are downsizing, reducing their footprint. Some are leaving altogether, very few are increasing their space. Empty storefronts stick out like missing front teeth in retail districts, but are now appearing in commercial and business districts. Prime space sits empty, and has done for months, if not years. Starbucks recently closed its flagship Vancouver location after 24 years. If that isn’t proof there’s a problem, then I sure don’t know what is.
Something you’ll also see a lot of, businesses moving around to new locations. This is typical of a time when a city is either growing or faltering, and Vancouver’s vacancy rate tells us it’s likely the latter. When times are tough, businesses shop around, try to find better deals on their overhead, reduce size, change locations, anything to deal with their falling revenues.
And if that wasn’t enough, the fancy new buildings going up and having a very hard time finding tenants. Some which are nearly complete only have commitments for 25% of their space, a building in New Westminster, the largest ever built there, has been complete for a year and still has yet to find its first tenant. In Surrey, the vacancy rate has skyrocketed past 20%, to 22% and rising. A historically “normal” vacancy rate is south of 5%, for Surrey, maybe 8% at the very most, but even that’s a problem. 22% is a major red flag, and no doubt has people worried.
What’s even stranger is the lack of recognition by the media, government, and even locals. No body seems to notice, and those who do, explain it away by blaming it on the “high rent,” as if the real problem is the economy is so hot, landlords are overcharging. Vancouver has had high rent for decades, and it’s never stopped businesses from leasing, and its rents are not out of line with the rest of the country.
So, what’s going on? Consult a Vancouver Blog and you probably won’t find any answers, unless the question you had was about where to find the best Ahi Tuna. Vancouverites are blissfully unaware of the growing problem in their real estate market, so even a thorough search of Vancouver Blogs will do you little good. To find the answer, look to the drivers of BC’s economy, namely resources and resource financing.
Commodity prices across the board have crashed, on average by 50%. This has done severe damage to miners, suppliers, and financiers, which make up a healthy percentage of Vancouver’s business and real estate. Vancouver is also a port city, and a quick glance of the Baltic Dry index shows it’s at its lowest level in history, meaning that the shipping industry has never been in worse shape. Add to this the staggering debt loads being carried by Canadians, but primarily Albertans and British Columbians, and you start to get an idea what the problems may be.
Everyone in Vancouver is house rich, but cash poor. This doesn’t make for a healthy consuming public, and thus, retailers are struggling, businesses can’t make ends meet, and in the end Vancouver is for lease.