Canada's Office Market Marks Year of Recovery Post-Pandemic, Reports CBRE

📅 2 weeks ago

CBRE's latest report indicates that Canada's office market has seen a year of recovery with decreasing vacancy rates, particularly in major cities like Toronto, Calgary, and Montreal.

TORONTO — According to a recent report released by CBRE, Canada’s office market has officially completed one full year of recovery following the disruptions caused by the COVID-19 pandemic. The report highlights that the country’s office vacancy rate has decreased to 17.1 per cent in the second quarter, down from 18.7 per cent during the same period last year. Marc Meehan, the research managing director at CBRE Canada, remarked in a news release, "One year of solid office demand and declining vacancy is worth noting since many still question the office market."
The findings of the report reveal that net absorption rates have shown positive trends in seven out of eleven Canadian markets, with total net absorption hitting 1.2 million square feet. Notably, the cities of Toronto, Calgary, and Montreal led this growth, each witnessing an absorption of over 300,000 square feet of office space during the second quarter. This resurgence aligns with a growing trend of employers mandating a return to in-office work.
Last summer, several of Canada’s largest corporations, including major banks, announced their transition to a four-day work week that requires employees to work from the office. Additionally, various levels of government have initiated policies aimed at increasing the number of in-office days for their employees.
The report further indicates that the fundamentals for downtown office spaces are on an upward trajectory, with nearly all Canadian cities experiencing a tightening of inventory in the second quarter. Moreover, all categories of office spaces across the nation are reporting a decline in vacancy rates. Meehan elaborated that the initial phase of the office recovery has predominantly benefited “trophy buildings,” with demand gradually extending to lower-tier office spaces.
"The balance of Class A was the primary beneficiary, however even Class B/C vacancy is starting to improve amid a mix of transactional activity and the removal of inventory for building conversions," he stated. The report also noted that the vacancy rate for trophy office buildings is now just one percentage point higher than pre-pandemic levels, currently at 9.4 per cent.
In terms of top-tier office space, Toronto has the least available, with a remarkably low vacancy rate of 2.6 per cent for AAA office spaces. On the other hand, CBRE pointed out that new office construction starts remain at a low ebb, with only a single new project commenced in the second quarter. The report warns that the “thinning pipeline” of new office supply has reached a historic low and is poised to remain constrained, with no significant deliveries anticipated before 2027.

Related Posts