Total office vacancy has dropped across Canada’s six largest urban markets, Colliers reports. Newly released results for the third quarter of 2018 suggest pre-leasing commitments from banks and tech companies for new premises in the Toronto and Vancouver markets underlie the growth.
The Canadian market saw more than 2.8 million square feet of positive absorption and a 32 per cent increase in new construction, bringing the tally of new space in progress to more than 14.6 million square feet. Some market highlights include:
Toronto retains its title as the tightest major metropolitan market in North America. Total vacancy across all office nodes has dropped from 9.3 to 8.9 per cent. Colliers analysts report tenants are now starting their search for space at least two years in advance — a shift from the traditional 12 to 18 month time frame. In major Q3 deals: Microsoft announced it will relocate its Canadian headquarters to CIBC Square, now being developed by Ivanhoe Cambridge and Hines; and three tenants — Index Exchange, Shopify and Spaces — committed to The Well, the 1.6 million-square-foot multi-use project RioCan and Allied Properties REIT are jointly developing.
Greater Vancouver recorded positive absorption for the sixth straight quarter. Of the new supply in downtown 30 per cent has been pre-leased, including The Stack office project at 1133 Melville Street and Amazon at the Post South Tower and 401 West Georgia.
The office vacancy rate dropped from 10.8 per cent in Q2 to 9.3 per cent at the end of Q3., as more than 1.3 million square feet of space was leased.
Declining asset values are prompting developers to consider major retrofits or conversions to residential uses. Meanwhile, several infrastructure projects are planned, underway or nearing completion in downtown Edmonton, including the Royal Alberta Museum, Stanley Milner Library and Winspear Centre Completion Project.
Nearly 280,000 square feet of absorption occurred in the downtown market during the quarter, while completion of the TELUS Sky tower brought another 462,000 square feet onto the office market. Suburban tenants are now considering downtown options due to attractive lease rates.
The downtown core saw the largest decrease in availability making it increasingly more difficult for tenants to find new space Ottawa’s citywide vacancy rate is now is 7.7 per cent, and an even lower 5.8 per cent downtown.