(Toronto) Canada is on track to experience its first year of positive office leasing activity since 2019, after six of the top 10 markets recorded positive net demand in the third quarter, according to a report released Tuesday.
Posted at 2:44 p.m.
Sammy Hudes
The Canadian Press
Toronto led the way in the quarter, with more than 650,000 square feet of positive net absorption – the amount of space leased compared to inventory that became available. This was split between buildings in the city center and the suburbs, commercial real estate services firm CBRE said.
However, performance was muted by more mixed results in the Montreal, Vancouver and Ottawa markets, which each recorded more than 100,000 square feet of negative net absorption and saw overall office vacancy rates increase by ‘one quarter to the next. Quarterly negative net absorption in the Montreal market was 431,000 square feet.
The report said suburban markets nationwide continued to show improvement for a fifth straight quarter, with the national suburban vacancy rate falling a tenth of a percentage point to 17.3 percent.
Meanwhile, the national downtown vacancy rate rose three-tenths of a percentage point to 19.7 percent. The picture is different in the Montreal market, with vacancy rates of 20.6% in the suburbs and 18.6% in the city center.
Three markets saw their downtown availability increase significantly during the quarter: Montreal, London and Vancouver.
In the Montreal market, rental activity levels “reflect the current climate, where occupants are taking more time before committing to new contracts.”
“This trend is expected to persist and, in the absence of significant projects to be delivered soon, result in a slowdown during the second half of the year,” the report said.
Seven Canadian cities recorded a decline in suburban vacancy rates in the third quarter, led by London, Toronto and Calgary. Four markets – Edmonton, Calgary, Waterloo and Winnipeg – saw downtown vacancy rates decline.
CBRE’s managing director of national research, Marc Meehan, said a gap is emerging between older office buildings, where demand is falling, and “prestige assets”, which the firm describes as the upper level of Class A space – generally the newer, more modern properties.
Vacancy rates for premium assets fell by a fifth of a percentage point during the quarter, led by demand in Calgary and Toronto. The vacancy rate for prestige assets has reached the lowest level in almost four years, according to the report.
“Owners of older office buildings are having difficulty attracting tenants. However, increased demand for quality office space could have broader positive impacts,” Mr. Meehan argued in a press release.
“With the availability of premium assets tightening, interest is likely to shift to higher quality properties, particularly those in prime locations and with highly sought-after amenities,” he explained.
Another key indicator of the health of the office market, sublease space has declined for a fifth straight quarter since its peak in mid-2023, having lost 2.2 million square feet since then.
CBRE reported that the current 14.8 million square feet of sublease space nationwide is the lowest level seen in nearly two years, representing 3% of total space inventory. of offices in Canada.
