TORONTO — Demand for office space in Canada is increasing the leverage of landlords in lease negotiations, according to a new report.
CBRE reports that net absorption of office space has reached two million square feet in the third quarter, marking the fifth consecutive quarter of positive leasing activity, with nine out of 11 regional markets showing gains.
Marc Meehan, managing director at CBRE Canada, emphasizes that the office market recovery is now “well-entrenched.” He notes a limited supply of “trophy” buildings is contributing to competition across various property types, especially in areas adjacent to downtown cores.
Key Highlights:
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Vacancy Rates: Eight Canadian markets, including Toronto, Calgary, Ottawa, and Halifax, reported decreasing downtown vacancy rates. Vancouver, however, experienced a rise in vacancies due to a single tech tenant’s consolidation.
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Supply Constraints: A slowdown in new office supply is anticipated, with no significant project completions reported recently. Full-year new supply is projected at just 2.3 million square feet, far below the five-year average.
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Future Outlook: CBRE forecasts a constrained inventory with notable new office completions not expected until 2032 unless new construction begins soon.
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Sublease Space: National sublease space has decreased by 1.3 million square feet, the largest decline since 2005, indicating a shift toward improved occupier sentiment, with sublet spaces halved from their peak over three years ago.
Meehan warns that the growing demand for quality office space in desirable locations poses challenges for businesses as supply tightens.
