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Just-released third quarter stats from CBRE
shed light on how the pandemic has impacted Canada’s office and industrial markets.
Vancouver and Toronto—tied for North America’s lowest office vacancy rate at the end of 2019—both saw their downtown office vacancy rise to 4.6% and 4.7% respectively in Q3. These remain the lowest downtown office vacancy rates in North America. Subletting is also up significantly in both markets.
“Without question, Canada’s largest office markets are experiencing a shift in demand and businesses continue to weigh the long-term impact of COVID-19 and the ability to work from home on their operations,” said CBRE Canada Vice Chairman Paul Morassutti
“That said, the third quarter numbers are similar to what was seen during previous recessionary events and do not yet reflect anything more significant than that at this juncture. The vacancy rate increase and amount of new sublet space are mostly in line with 5-year quarterly averages.”
Here’s what CBRE’s local market leaders are saying about the latest trends in cities across Canada:
Jason Kiselbach, Vancouver
So far the largest players in the office market are maintaining their current footprints and operations. “It absolutely bodes well for the (commercial real estate) industry, ” Kiselbach told the Vancouver Sun. The underlying fundamentals of the city, including the high livability score, a talented workforce, the constrained supply of space and good immigration policy, will work in Vancouver’s favour going forward.
Greg Kwong, Calgary
"In this type of environment, Alberta, specifically Calgary, has to be pulling on all the levers," Kwong told CBC News. "And that's promoting the tech sector, converting office buildings, quite frankly demolishing some office buildings that are perhaps at the end of their useful life."
Dave Young, Edmonton
“Our industrial market was fairly active in the quarter,” Young told the Edmonton Journal. “I would suggest that if you went to every major North America city, you would see the same thing. I think that’s a strong point for Edmonton. We’ve got a lot of large users in the market right now. We see a lot of large lease transactions occurring. So there is a bright spot in the real estate market.”
Shawn Hamilton, Ottawa
The Federal Government doesn’t have the same stabilizing effect on Ottawa’s office market which now houses more tech firms than in previous downturns. “This shows that the downtown is starting to behave more like a private-sector market than it has traditionally,” Hamilton told Ottawa Business Journal. While business tenants make for a more vibrant downtown core in good times, “the corollary of that is when things are soft, we might feel it a little more.”
Ted Overbaugh, Waterloo Region
“To make long-term decisions like ‘we don’t need an office’ is a bit short-sighted, in my opinion,” Overbaugh told the Waterloo Region Record. “The office market’s going to face some headwinds. But when you look at the population growth in the region, and the quality of the office buildings and the talent pool, there’s a really good, compelling story.”
Avi Krispine, Montreal
“Teleworking is imposed, it is not a choice. As soon as there is a cure, the corporate culture will take over teleworking, and employees will come back to the office.” Krispine told Les Affaires. Subletting increased in Montreal in the third quarter, an area that should continue to grow until there is a vaccine, but he doesn't believe this trend will last.
Andrew Bergen, Halifax
“I look at other large markets across the country, Toronto, Vancouver, Calgary, we’re seeing significant spikes in sub-lease vacancy,” Bergen told the Halifax Chronicle Herald. “Atlantic Canada, Halifax, we’re in a bit of a unique situation out here, and we haven’t seen that spike in sub-lease because most offices have reopened in some capacity.”