Canada’s Downtown Office Vacancy Rates on the Rise

Canada’s downtown office vacancy rate rose sharply to 19% in March 2023 according to new data from CBRE, a global commercial real estate services firm. The vacancy rate increase was largely driven by major increases in Toronto and Vancouver as more businesses adopt hybrid work arrangements and downsize their office space.

The office vacancy rate in downtown office buildings across Canada has been steadily increasing over the last few years according to a report from CBRE, a global commercial real estate services firm. The national downtown office vacancy rate rose to 10.2% in the first quarter of 2019, up from 9.7% a year earlier. This trend is happening in many major cities across the country.

In Toronto, Canada’s largest city, the downtown office vacancy rate increased to 5.3% in Q1 2019 from 4.4% a year ago. While this is still a relatively low vacancy rate historically for Toronto, it is the highest it’s been since 2015 and continues an upward trend. The city’s downtown office market has been absorpting an average of 300,000 square feet of new office space every quarter for the past two years. However, demand has not quite kept up with this pace of new supply entering the market recently.

Vancouver has seen one of the sharpest rises in downtown office vacancies. Its vacancy rate jumped to 7.1% in Q1 2019 from 4.3% a year ago. Vancouver has delivered around 1.5 million square feet of new office space downtown since 2017. While demand remains healthy, the pace of new office completions has outstripped absorption, pushing the city’s vacancy rate higher. Office construction is still very active in Vancouver, so vacancy rates may continue to climb for the next few quarters until demand catches up.

In Montreal, the downtown office vacancy rate edged up to 7.3% from 6.9% a year ago. Canada’s second largest city has also seen a fair amount of new office construction with around 1.3 million square feet completed downtown since 2017. Leasing activity, though, has not quite kept pace leading to higher vacancies. While Montreal’s economy and job growth remain steady, there is some concern that vacancy rates could rise further over the next year with several new projects being completed.

Calgary’s office market continues to struggle with low energy prices, and downtown vacancies currently sit at 24.6% which is significantly higher than Canada’s other major cities. With little new demand, Calgary’s downtown has been absorpting negative net space for the past two years, and conditions remain challenging.

Other markets like Ottawa and Edmonton have also seen minor upticks in downtown office vacancy rates over the past year. While Canada’s economy overall remains healthy, pockets of higher office supply and lagging demand in some cities have put upward pressure on vacancy rates, especially in western cities closely tied to the energy industry. Broadly speaking though, most industry experts expect Canada’s downtown office market to remain balanced and relatively stable for the foreseeable future barring any major economic events.

Leave A Reply