A lot has changed since 2014.
A quarter of offices in Calgary were vacant in Q4-2020, according to a new report—vastly above the 10.8% nationwide vacancy rate.
Colliers Canada’s report attributed the rise in Canada-wide vacancies to increasing downtown sublets, but it also noted that, at $17.72 per square foot, the average net asking office rent this quarter was the highest it’s been since Q4-2019. Still, the report stated that office attendance in Canada’s downtowns is below 15%, and around 30% in suburban areas.
At 4.9%, Vancouver had the country’s lowest vacancy rate for office space in Q4-2020. However, sublet space increased by 350,000 sq ft and, compared to the suburbs, the downtown is suffering, according to Colliers. Landlords in the city haven’t given up much, but they’re willing to negotiate with tenants. Nevertheless, until a COVID-19 vaccine is distributed, not much will change.
Alberta had Canada’s highest vacancy rates. Calgary topped all major Canadian markets at 25.7%, although Colliers says that will likely decrease if the COVID-19 vaccine is successfully rolled out, followed by Edmonton at 17.6%.
“A majority of recent transactions in the Calgary office market have been shorter-term deals below 10,000 sq ft, however, some tenants with longer outlooks continue to vaccine rollout has increased office leasing interest, with the majority of tenants expecting to return to the office.”
Edmonton reported negative net absorption this quarter—although that comes with a caveat: two of the biggest transactions were relocations within the same building, which resulted in negative absorption—and with increased sublease space, leasing activity moderated.
In Winnipeg, Class A buildings are in demand among tenants, especially ones with free parking, and have experienced, both in downtown and the suburbs, positive absorption. On the other hand, B and C buildings saw negative absorption in Q4, says Colliers.
Toronto’s office vacancy rate increased in Q4 because of rising downtown sublets, and while average rents in the city’s core declined, rents in the suburbs managed to hold. Nevertheless, new premium space infused the downtown market and brought the GTA’s average rent up.
Leasing activity in Montreal is on the rise, although there’s a total of 1.4 million sq ft of office sublet space and landlords have been doling out concessions to tenants. A trend of tenants extending their leases on shorter terms also began in the fourth quarter, according to the report.
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Written by Canadian Real Estate Wealth.
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Canadian Real Estate Wealth