While Canada’s office markets continued to show healthy market fundamentals in the first half of 2013, some markets appeared to soften during this time period.
According to recent report by Avison Young, competition for office space was highest in the downtowns of major markets, with a vacancy rate of 5.6 per cent in the first half of 2013, in comparison to the overall national office vacancy rate of 7.9 per cent. Calgary boasted the lowest downtown vacancy rate at four per cent, followed by Ottawa at 4.4 per cent and Vancouver at 4.6 per cent. Calgary also had the highest average gross rents for class-A space during this time, with prices at $57 per square foot.
According to Bill Argeropoulos, vice-president and director of research (Canada) for Avison Young, many Canadian markets currently favour the landlord.
“Limited and diminishing space options have not only created a very competitive environment for premises, and elevated rents for select properties and quality of space, but have also muted the demand levels that we have all been accustomed to during the past couple of years,” says Argeropoulos. “Most of the markets’ transactions have been renewals and/or expansions as landlords try to lock down tenants rather than lose them to the wave of new development starting later this year and into next.”
Suburban markets saw their collective vacancy rate rise in the last year, reaching 10.6 per cent after the first half of 2013. Regina has the lowest suburban vacancy rate, at 3.1 per cent, while Mississauga, Ont., has the highest at 13.7 per cent.
Development continues, with office space under construction increasing by 4.5 million square feet in the past 12 months. Toronto is the biggest development market with 7.1 million square feet, of which 5.3 million square feet is located downtown.
Tenants are increasingly embracing sustainability, demanding Leadership in Energy and Environmental Design (LEED) certified buildings and environments. This is illustrated by one of the larger developments underway: the Oxford Properties-owned Ernst & Young Tower. Located in downtown Toronto, the 40-storey, triple-A office tower is aiming for LEED platinum certification.
