The first quarter of 2012 was flat for the Vancouver office market, according to NAI Norris, Beggs & Simpson’s reports. Of the 4.5 million square feet of Vancouver office space the report tracks, the vacancy rate was 16.02 percent, just slightly above the previous quarter. For comparison, Vancouver had vacancy rates of more than 20 percent during the first quarter of 2011.
Though a healthy vacancy rate would be closer to 10 percent, Vancouver’s vacancy rate is considerably lower than the average for all other Portland-Metro suburban submarkets, which was at 22.41 percent during the first quarter. One major transaction in the past year that significantly contributed to this decrease in vacancy was PeaceHealth’s approximately 163,000-square-foot lease at Columbia Tech Center during the third quarter of 2011.
In many ways, tenants and landlords are still in the same general position they were in this time last year. We’re still primarily seeing a tenant’s market, and tenants are getting bolder with their requests, which are being granted provided the economics make sense overall. Landlords are learning to be more prudent and to pick their battles, and the strength and stability of the tenant truly impacts how aggressive a landlord will be when negotiating terms. Landlords also don’t necessarily have complete control, since in the current environment lenders are often involved in the decision-making process. There are still many creative approaches, though, to make an aggressive deal fair to both parties.
Despite the fact that the brokerage business has been relatively slow this past quarter, there’s always something going on. Tenants are constantly mulling renewals, expansions, downsizing or expanding, which all force them to focus on where they want to be and what is most important to them and their business in terms of commercial space. The site search and leasing process can take time, so tenants should begin exploring their options early.
Since the first quarter of 2012, we are seeing some progress and reason for optimism. In 2011, many business owners took a “wait and see” approach to decision-making and making significant moves. But today, many tenants are beginning to feel more confident, and stepping back into the market to evaluate their space needs in this post-recessionary environment.
2012 will probably not be a record positive year for the Vancouver area office market, but it will be an improvement. Our advice to tenants and landlords is to remember to set realistic expectations, and remember that our area tends to lag other major metro areas by about six months for both economic weakening and improvement. Economic factors like stock market fluctuation, continued challenges with the European debt situation and slow-to-improve unemployment rates all influence business owners’ confidence. November’s presidential election will also play a large part in confidence and decision-making this year.
Clark County has many positive factors that appeal to businesses and their owners. The area’s proximity to Portland and generally more affordable rents are pluses, as well as its port and rail access, employee base and quality of life. Companies like Fisher Investments, PeaceHealth and the most recent announcement of BHP Billiton, are all examples of businesses that have taken note and made major investments in the area. This leads us to be optimistic about Vancouver’s commercial property markets in the future.
Vice President Tamara Fuller and Senior Real Estate Broker Doug Bartocci specialize in Clark County office leasing and sales at NAI Norris, Beggs & Simpson, a real estate brokerage and asset/property management company. Contact them at 360-852-9600 or tfuller@nai-nbs.com or dbartocci@nai-nbs.com.
