Some silver linings are becoming apparent for the sector, however
The future of the Canadian office sector remains uncertain as the nation’s downtown office vacancy rate increased for the fourth straight quarter in Q1, according to a new study by CBRE.
CBRE reported that a growing number of emptied-out office buildings in Toronto, Vancouver, and Montreal drove the national vacancy rate for the asset class to 14.3%, significantly higher than the 9.3% level during the first quarter of 2020.
For the major markets, the highest downtown vacancy rate was Montreal’s 10.6% (up from 6.4% last year), followed by Toronto’s 9.1% (up from 2%), and Vancouver’s 6.2% (up from 2.2%).
Edmonton, which CBRE described as a market that “bucked the global trend,” saw its downtown vacancy level fall by 70 basis points to 19.4%. Halifax reported another 10 bps decline in its office vacancy to 19.8%.
However, CBRE stressed that while office vacancy continues to be a justified concern, “the moderation in that trend is encouraging and reflects businesses being able to foresee a return to their workplaces as the vaccine rollout makes progress.”
Canada saw approximately 1.8 million square feet of office space made available for sublease during the first quarter, dropping by 44% from the 3.3 million sq. ft. of sublease space added in Q4 2020 and the 2.3 million sq. ft. added in Q3 2020.
“Perspective is important here,” said Jon Ramscar, Toronto downtown managing director at CBRE. “Of the 30 largest downtown markets in the US and Canada, four of the five tightest are Canadian: Vancouver, Toronto, Montreal, and Ottawa.”
Ramscar added that touring activity is “noticeably” resurgent.
“In fact, in March, Toronto saw the most office space tours since the onset of the pandemic, with demand highest among tech companies and law firms,” Ramscar said. “Canadian office markets are beginning to stabilize with some early indications of a shift in sentiment in some sectors.”
