What Happened

Avison Young has forecasted that Downtown Vancouver’s premium office market could swing from a current surplus to a significant shortage by 2029 if no new Class AAA or Class A office towers are completed. As of early 2026, the vacancy rate for these high-quality spaces sits at 12.9%, representing approximately two million square feet of vacant space. This elevated vacancy is largely attributed to a construction boom between 2022 and 2024 that added over three million square feet of premium space, combined with a lack of new supply in the pipeline following late 2023.

The forecast relies on three leasing scenarios assuming no new completions through 2029. Under an average annual absorption rate of roughly 330,000 square feet, vacancy is projected to fall to 6.2%. If leasing demand drops to half of historical levels, vacancy would decline to 10%. However, under a scenario where demand reaches 150% of historical levels, vacancy could plunge to 2.3%, returning to tight pre-pandemic conditions.

Major tenants are already driving this shift. Amazon pre-leased substantial portions of new space added between 2022 and 2024, while lululemon has secured 120,000 square feet at Burrard Place and 300,000 square feet at the former Nordstrom space in CF Pacific Centre. Microsoft expanded its footprint at the B6 tower, and Sony Pictures Imageworks relocated its headquarters to The Post. Despite this strength, developers like Cadillac Fairview remain cautious, with Vice-President of Development Matthew Cavanaugh stating they will not proceed with the Waterfront Station tower proposal without a lead tenant secured.

Why It Matters

The potential shift from a 12.9% vacancy rate to as low as 2.3% by 2029 marks a fundamental reversal in the Downtown Vancouver office market. A vacancy rate below 4% to 8% is generally considered healthy for a balanced market; falling to 2.3% would create a severe landlord’s market. This tightness would likely drive up lease rates and reduce landlord concessions, impacting corporate real estate budgets and potentially influencing business location decisions across the region.

For the broader economy, this shortage highlights the risks of over-correction in commercial real estate. The market has swung from extreme tightness (2% vacancy in late 2019) to surplus due to pandemic-era remote work and a construction boom. The current forecast suggests that the "flight-to-quality" trend—where tenants prefer newer, amenity-rich buildings over older stock—will accelerate the absorption of new supply. Once the current pipeline of over three million square feet is leased, the lack of new Class AAA or Class A projects will leave the market with very few options for high-quality space.

Local Vancouver / Burnaby Context

In the Downtown Vancouver peninsula, the office market has been defined by a "flight-to-quality" dynamic since the pandemic. While older buildings struggle with occupancy, newer developments have seen strong demand. The Post, occupied by Sony Pictures Imageworks, and the new space at 601 West Cordova St. (approved by the Development Permit Board in May 2026) represent the new standard for Class AAA space. The approval of the revised 22-storey, 417,000-square-foot Waterfront Station tower by Cadillac Fairview is a critical data point, but its completion is contingent on securing a lead tenant, a condition emphasized by Matthew Cavanaugh in spring 2026.

Local development activity is currently constrained. lululemon’s 13-storey headquarters at 1980 Foley St. in False Creek Flats, approved in 2020, has stalled, illustrating the hesitation among major corporate landlords. Meanwhile, the Oakridge Park mixed-use complex is completing its first phase through 2027, adding over 700,000 square feet of office space (420,000 strata and 300,000 leasable), which will provide some supply but is located in Richmond, not Downtown Vancouver. The lack of new Class AAA or Class A completions in Downtown through 2029 is the primary driver of the Avison Young forecast.

Market Impact

For commercial tenants, the coming years will likely see a reduction in available high-quality space and a decrease in lease incentives. Companies that have delayed expansion or relocation may face higher costs and limited options by 2028-2029. For landlords, the market will shift from a tenant-friendly environment to a landlord’s market, potentially increasing the value of Class AAA assets. However, this assumes that the current absorption rates hold. If economic conditions dampen leasing demand, vacancy could remain higher, delaying the shortage.

The construction industry will feel the impact of the development pipeline gap. With no new Class AAA or Class A projects expected to break ground in the near term, developers are waiting for clearer signals of demand. The Waterfront Station proposal’s reliance on a lead tenant underscores this risk. If a major anchor tenant does not emerge, the project may stall, further delaying the return of supply to the market.

Builder / Developer Perspective

Developers are facing a "wait-and-see" environment for Class AAA office space. The construction timeline for a new tower is approximately four years post-approval and tenant pre-leasing, meaning any project started now would not complete until 2030 or later. This lag creates a risk of overbuilding if demand peaks and then falls. Cadillac Fairview’s stance on the Waterfront Station tower—requiring a lead tenant before proceeding—reflects a broader industry caution. The lack of new Class AAA or Class A projects through 2029 is not due to a lack of demand, but rather a lack of supply in the pipeline. Developers are waiting for clearer signals of sustained leasing activity before committing to new high-quality office construction.

BurnabyHouse Insight

The Downtown Vancouver office market is undergoing a classic cycle correction. After a period of excess supply and high vacancy, the market is now absorbing that surplus through a "flight-to-quality" trend. The Avison Young forecast is not just a prediction of shortage, but a warning of the fragility of the current equilibrium. The market is balanced on a knife-edge: if leasing demand holds, vacancy will tighten rapidly, creating a landlord’s market. If demand falters, vacancy will remain elevated, delaying the shortage. The key variable is the Waterfront Station tower. If Cadillac Fairview secures a lead tenant and breaks ground, it will signal confidence in the market. If it stalls, the shortage may be delayed, but the underlying demand for Class AAA space remains strong. Investors and tenants should watch this project as a barometer for the market’s health.