Press Release

Office Vacancy Moderates in the First Quarter While A Nationwide Logistics Crunch Looms

06 Apr 2021

Office touring activity rebounded, less sublease space came to market and industrial availability dropped to an all-time low in Q1

 

Canada’s major office markets saw their vacancy rate increases moderate in the first quarter of the year and the nation’s industrial real estate hubs watched as their availability rates dropped to all-time lows. CBRE’s new Q1 2021 Quarterly Statistics Report notes the possibility that the country could run out of available logistics space by year’s end.

The national downtown office vacancy rate increased for the fourth consecutive quarter, to 14.3%, driven by upticks in Vancouver, Toronto and Montreal, where vacancy rates rose to 6.2%, 9.1% and 10.6% respectively. Edmonton bucked the global trend, with its downtown office vacancy rate dropping 70 basis points (‘bps’) to 19.4%; as did Halifax, where downtown vacancy decreased 10 bps to 19.8%.

While office vacancy continues to rise, the moderation in that trend is encouraging and reflects businesses being able to foresee a return to their workplaces as the vaccine rollout makes progress. There was a net 1.8 million sq. ft. of office space made available for sublease in Q1, down 44% from the 3.3 million sq. ft. of sublease space added in the fourth quarter of 2020 and the 2.3 million sq. ft. added in Q3 2020. And there are few large blocks of sublet space available, indicating that larger corporations and institutions are not turning away from Canada’s downtown centres.

“Perspective is important here,” says CBRE’s Toronto Downtown Managing Director Jon Ramscar. “Of the 30 largest downtown markets in the U.S. and Canada, four of the five tightest are Canadian: Vancouver, Toronto, Montreal and Ottawa. And touring activity is noticeably on the rebound. In fact, in March, Toronto saw the most office space tours since the onset of the pandemic, with demand highest among tech companies and law firms. Canadian office markets are beginning to stabilize with some early indications of a shift in sentiment in some sectors.”

Industrial sets records

Canada’s major industrial markets continued to burn white hot in the first quarter of the year. Exceptional leasing velocity from coast to coast saw the national availability rate decrease by 40 bps in a single quarter, to 2.9%, the lowest industrial availability rate in the country’s history.

And while Toronto (with a 1.6% availability rate), Vancouver (1.7%) and Montreal (1.9%) remain North America’s tightest industrial markets, the largest quarterly compressions were recorded in Calgary (down 140 bps to 7.8%) and Ottawa (down 90 bps to 3.2%).

National net industrial absorption totaled 10.4 million sq. ft., which ranks as one of the largest quarterly figures in Canadian history. If sustained, this level of absorption would see several Canadian cities run out of logistics space before year’s end, CBRE’s report notes.

Developers remain bullish on Canada’s industrial market, as there is currently 26.1 million sq. ft. of logistics space currently under construction, the bulk of it in Toronto, Vancouver and Montreal. While it’s a near-record amount of new construction, the majority of these new developments have already been pre-leased. Canadian industrial markets are the tightest in North America for good reason: we literally can’t build the space fast enough to satisfy the voracious demand.

Read more in the Q1 2021 Quarterly Statistics Report

 
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.

In Canada, CBRE Limited employs 2,200 people in 22 locations from coast to coast. Please visit our website at www.cbre.ca.