Canada’s office market posted positive absorption of nine million square feet in the 12 months ending June 30 – significantly more than the nearly six million square feet absorbed in the prior 12-month period, says Avison Young’s Mid-Year 2019 Global Office Market Report released on Tuesday.
The report said demand was strongest in Toronto, Montreal and Vancouver, while Calgary finished in positive territory. Canada’s overall office vacancy trended lower, falling 120 basis points (bps) year over year to end the first half of 2019 at 10.3 per cent.
The report covers 79 office markets in eight countries across the globe: Canada, United States, Mexico, United Kingdom, Germany, Poland, Romania and South Korea.
It said urban intensification and surging demand from tech and co-working companies in major markets are driving absorption in downtown office markets in Canada, with 12-month absorption almost doubling year over year to four million square feet – more than half of that absorbed in Toronto. Vancouver (1.9 per cent) surpassed Toronto (2.1 per cent) to register the lowest downtown office vacancy in Canada – and North America.
“The labour market remains the major catalyst for Canada’s economic expansion and thriving commercial real estate sector,’ said Mark Fieder, Avison Young principal and president in Canada. “Urban intensification boosted by immigration, a growing knowledge-based economy and the rising co-working industry have powered Canada’s office market. A global phenomenon, co-working is taking Canada by storm and prompting landlords and tenants to adapt. Meanwhile, the growing technology sector is taking a bigger slice of the leasing pie – especially in Vancouver, Toronto, Montreal and Ottawa – and, in many cases, driving innovation within traditional businesses.”
The report said developers are doing their best to keep pace with the robust demand, as more than 21 million square feet was under construction at mid-year – an increase of 40 per cent year over year. Downtown construction outstripped the suburbs by more than twofold. Toronto had the most overall (11.4 million square feet) and downtown (9.7 million square feet) office space under construction in Canada, trailing only New York (14.6 million square feet) among North American markets.