CBRE has just released our Q1 2021 Quarterly Statistics Report and the numbers reveal that we may be through the worst of the COVID-19 storm.
After a year where the touring of available office space was complicated by shutdowns, there has been a significant increase in the number of tours taking place in recent months, with much of the demand coming from law firms and tech companies.
Virtual office tours grew rapidly during the pandemic, taking a nascent technology mainstream. This technology will become an increasingly important tool in shortlisting properties; however, organizations will continue to do in-person walk-throughs before they finalize their decisions.
Office vacancy is still increasing nationwide but the pace of growth is tapering off. Signifying a flight to quality, vacancy in Class A space is growing more slowly than overall vacancy.
In Toronto, Class A office vacancy rose to 7.3% in Q1, but almost 2.7 million sq. ft. of space was delivered to this market in the past two quarters. That total represents roughly half the entire stock of office space in each of the Halifax, Waterloo and London markets.
Vancouver’s Class A office vacancy rose a mere 20 bps to 4.4% in the first quarter. Vancouver, along with Toronto, Montreal and Ottawa, remain the tightest offices markets in North America.
Enjoying renewed appeal, suburban office markets have remained stable. The overall suburban vacancy rate grew just 3.5% since Q1 2020. The average Class A suburban office net rental rate actually rose from Q4 2020 to $18.28 per square foot in the first quarter of 2021. Despite their challenged markets, Edmonton and Calgary saw just slight decreases in their average rental rates.
The amount of sublease space coming back to the market is also beginning to subside, with 1.8 million sq. ft. added nationwide in the first quarter, a decrease of 43% from the 3.3 million sq. ft. added in Q4 2020.
As of Q1, there is 15.5 million sq. ft. of sublet space on the market, representing just 3.2% of the market total and 22.2% of total vacant space. While sublet space is likely to grow in the coming quarters, the pace of growth is expected to continue to decelerate.
National net industrial absorption totaled 10.4 million sq. ft. in the first quarter, one of the highest totals on record, pushing the availability rate to 2.9%, an all-time low. Vancouver, London, Waterloo, Toronto and Montreal all posted availability rates under 2%.
Companies continue to build out their supply chain networks to keep pace with the purchase of goods online. This is leading to a shortage of logistics space in Canada’s major markets. Over 26 million sq. ft. is currently under construction across Canada, with more than one-third of the construction occurring in the Greater Toronto Area. As most of this space has been pre-leased, the new supply will make little impact on the limited availability
While Canada is battling the pandemic’s third wave, vaccine rollouts are ramping up and there is finally light at the end of the tunnel. Organizations are turning their attention to designing their post-pandemic workspaces. Expect leasing activity to continue to escalate as these groups finalize space requirement decisions in the coming months.