Article
Suburbs Awaken, Driving the Canadian Office Recovery
July 22, 2022 3 Minute Read
The suburbs are often seen as sleepy and a bit boring. But in the past quarter office tenants helped to rouse the burbs from their slumber.
Historically downtown office vacancy has been lower compared to the suburbs as companies sought out the hustle and bustle of the city centre. This trend is changing.
For the first time in Canadian office market history, downtown vacancy is exceeding suburban vacancy.
According to CBRE’s new Q2 2022 Office Figures report, the national suburban vacancy rate reached 16.0% last quarter. That’s 90 basis points (bps) lower than the national downtown vacancy rate, which stands at 16.9%.
While this trend has been observed in markets across the country – with the exception of Toronto and Montreal, whose downtown markets remained stronger in the second quarter – it is particularly pronounced in Vancouver, where suburbs such as Surrey have become a destination of choice for tech users looking for large blocks of office space.
Of the 537,700 sq. ft. of office space absorbed in Vancouver over the course of Q2, 419,000 sq. ft. of that space was located in the suburbs, accounting for 77.9% of total net leasing activity.
What Explains It?
The performance of the suburbs can be attributed to several factors.
As companies continue to figure out how to tackle hybrid work, it is becoming increasingly clear that employees are reluctant to engage in a long commute downtown when they have the option to stay in the comfort of their homes. As a result, the suburbs become more appealing due to their proximity to workers and the convenient highway and public transit accessibility they offer.
Tech users have been leading the increased demands levels for the suburbs, particularly in Vancouver, as companies look to grow their footprints in close proximity to their existing facilities; others are enticed by the availability of large blocks of space rarely found in the downtown core.
Some downtown office buildings have greater appeal than others. While newer, state-of-the-art, Class A buildings have been performing well and attracting tenants in the market, older Class B and C buildings are becoming harder to fill as businesses recognize that in order to overcome the drawback of a commute downtown, they need to offer employees highly personalized spaces with quality amenities.
This bifurcation of the office market was not as prominent in the suburbs.
“It’s all about the commute in the suburbs,” says CBRE Research Manager Christina Cattana. “The convenience of being able to drive somewhere close to where you live is a bigger factor impacting the appeal of office properties in suburban locations.”
There is a lot of uncertainty surrounding Canadian office markets these days. One thing that is certain, however, is that suburban office nodes are anything but sleepy. They’re leading the long-awaited office market recovery and flipping a well-established office market narrative on its head.
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