Post-secondary educational institutions, which had been helping drive new leasing and lower office vacancy rates in prime Vancouver buildings, are now putting large chunks of space onto the sublet market in the wake of government cuts to foreign student quotas.

During Q2 alone, three major Vancouver post-secondary institutions placed almost 170,000 feet of space onto the sublet market, according to the Q2 2025 Vancouver office report from Avison Young. In a market of 58.5 million square feet of office space, that’s not an alarming statistic, but it did contribute to an overall softening of the city’s office leasing market in Q2.

Despite this trend reversal, and a small rise in vacancy, the report does paint an overall optimistic outlook for Vancouver, which has outperformed virtually every other major market in Canada.

Total availability in the city rose slightly to 14.5 per cent in Q2 (total vacancy was reported at 12.2 per cent), with 118,208 square feet of negative absorption. In the downtown, availability was 16.5 per cent (vacancy of 14.5 per cent), with 141,296 square feet of negative absorption in the quarter, and 202,526 so far this year.

The three downtown sublease blocks

Citywide, there was almost seven million square feet of space available, with about six million of that direct space and a million square feet of sublease space.

The three large blocks of space put up for sublease by the institutions are:

• Global University Systems listed more than 86,000 square feet in the downtown class-AAA market;
• LaSalle College placed over 32,000 square feet for sublease from its pre-leased space in the East Tower of The Kaslo at Renfrew District; and
• University Canada West is subleasing over 51,000 square feet of space at 626 West Pender St. 

The report notes all three listings offer longer-term sublease options of eight years or more.

The moves are in response to federal government cuts to foreign student permits, one of the measures the feds are taking to ease nationwide housing availability and affordability concerns.

In response, the AY report notes the international student population declined by 40 per cent in 2024 from 2023, and another 10 per cent drop is expected this year. 

The report states there were 22 options across Metro Vancouver for potential tenants seeking to lease over 50,000 square feet - 16 in class AAA/A buildings. In 2019 when the market hit an all-time low vacancy rate of 4.4 per cent, there were only two options over 50,000 square feet in existing buildings.

Other key data from the AY report

The report does note increasingly stringent return-to-office mandates from major employers, which it cites as part of the reason Oxford Properties recently bought out CPP Investments’ stake in a portfolio of seven western Canada office buildings for $730 million. 

Oxford is now the sole owner of the buildings, which include 355 Burrard St. (Marine Building), 1021 West Hastings St. (MNP Tower), 1055 West Hastings St. (Guinness Tower), and 1133 Melville St. (The Stack) in Vancouver.

"Over the past year, a growing number of companies including Amazon, BMO, JPMorgan, Canaccord Genuity, CIBC, and RBC, have implemented return-to office mandates,” the report states. “A common theme behind this decision is the belief in the effectiveness and value of having employees be in a place where they can innovate, interact, and produce quality work together. This renewed confidence in the workplace is also being reflected in investor activity.”

It is also being reflected in occupancy costs, which had been falling for the past year. After dipping 4.9 per cent in the previous year, gross occupancy costs rose $0.94 per square foot (1.7 per cent), in Q2. This lifted the average cost to $54.97 per square foot. 

The report also notes tenant demand is focused on “high-quality, move-in-ready space” which is contributing to the rise in gross occupancy costs for this type of product. Shell space, however, now requires “larger inducement packages to attract tenants, as long construction timelines and high construction costs discourage occupiers from committing to full buildouts when quality improved options are available.”