In this blog post, I would like offer a glimpse into our Mid-Year
2014 Canada, U.S Office Market Report, to be released next week.
Canada’s office vacancy rate finished the first half of 2014 at 9.2% –
up 120 bps from one year ago. This shift is not entirely surprising and is
largely attributed to new supply outpacing demand, coupled with workplace
strategies resulting in the release of excess space via a burgeoning sublet
market. However, the ongoing rationalization of space is something we will
watch carefully, as it will moderate future absorption levels. Remember the old
cliché: Past performance is no indication of future results.
Collectively, Canada’s downtown office markets posted a vacancy rate of
7.2% at mid-year 2014, compared with 5.7% 12 months ago – with vacancy rising
to varying degrees in all but two downtown markets, namely Guelph and Regina.
In Canada’s suburban markets, vacancy jumped an estimated 120 bps to 11.8% at
mid-year 2014 – with Quebec City the tightest, coming in at just under 5%.
However, any demand-supply imbalances experienced by the markets to date
have not deterred the development community, which is reflected in construction
figures. Nationally, almost 6 million square feet (msf) of new office
space was delivered over the past 12 months. Of this 6 msf, approximately
three-quarters was completed in the suburbs – with Vancouver, Calgary and
Montreal accounting for two-thirds of the completed area.
Through the first six months of 2014, more than 22 msf was under
construction across Canada, with downtown product outpacing suburban
construction by nearly a two-to-one margin. This discrepancy reflects the
ongoing phenomenon of major employers seeking to be closer to the Millennials
who are living and working in increasing numbers in major urban cores.
Please watch for my blog tomorrow on U.S. office vacancy expected to dip
further…
