The office vacancy rate in major Canadian cities fell to 5% in the second quarter from 5.4% in the first quarter, the second time the reading has been this low since 1985, according to preliminary figures compiled by Cushman & Wakefield.
Also, vacancies declined even as new square footage was coming to market.
The real estate company explained that Canadian central markets continue to see decisions driven by a consolidation/expansionary mindset, offering very few options, especially for those tenants with immediate needs for large contiguous space. This is leading to continued upward pressure on rental rates, particularly in Vancouver, Calgary and Toronto.
“There is a significant new office development cycle currently taking place in some markets—a level of building activity not seen since the early 1990’s,” says Pierre Bergevin, president and CEO, C&W Canada. “This should address a portion of the current pent-up demand which is being largely driven by the aggregation of workspace and employees, greater productivity found in more modern building operations and proximity to the workforce.
“Based upon the healthy list of new builds, combined with a growing list of prospective tenants looking to modernize and consolidate their operations, we expect the new developments to be well received, and provide much needed relief for tenants seeking larger space options.”
The central markets are actually taking customers from the suburban office supply, C&W said. The vacancy rate for these properties remained at 9.9% on a sequential basis.
There is a “reverse migration” to downtown areas, in part driven by green properties and properties which allow for more collaborative workspaces, the firm said.
C&W noted that by moving back to the central city, businesses are looking to attract and retain top talent. These people, it said, are increasingly looking to work, live, and play in the city.
