Demand for offices in Toronto and Vancouver has squeezed the vacancy rates of both, making them the joint tightest markets in North America.
CBRE Canada says that Vancouver’s office vacancy rate dropped to 2.6% in the second quarter of 2019, from 4.7% only a year ago. Meanwhile, the vacancy rate in Toronto held steady at 2.6% thanks to a downtown construction boom.
“Two years ago, it would have been unprecedented to have a Canadian city top the North American office rankings. We now have two Canadian cities setting the pace, which is truly remarkable,” noted CBRE Canada Vice Chairman Paul Morassutti. “Something special is happening in this country and the investments being made by businesses and developers suggest that our office and industrial markets are well-positioned for the digital economy.”
For office building owners, the tight vacancy rate is good news, with record-high average rental rates for Class A offices in Toronto’s financial district – reaching $40 per square foot for the first time ever. For Vancouver, the average rate increased to $44 psf from $42.02 psf in the previous quarter.
Other markets, property sectors
CBRE’s Q2 Quarterly Statistics Report shows that Ottawa’s office vacancy dropped to 7.0% in Q2, down from 9.9% in the same quarter last year, due to increased demand and limited new supply.
Calgary’s downtown office vacancy rate continued its slow decline to 26.1% in Q2, down from all-time high of 27.8% a year ago.
For the industrial sector, Toronto and Vancouver may not have the tightest vacancy rates in North America but they are in the pack.
Vancouver’s industrial availability rate fell to 2.1% in Q2 2019, despite having had the largest amount of new supply delivered in a single quarter in over 10 years in Q2 (1.5m sq. ft.) Toronto’s industrial availability rate has sat at a record-low 1.5% for the past two quarters.
In Montreal, availability of industrial product sits at half of what it was two years ago, dropping to 3.2% in Q2 while in the Waterloo Region five consecutive quarters of positive absorption means an all-time-low industrial availability rate of 1.6% in Q2, rivalling Toronto.
“Across the country the demand for industrial properties, from tenants and owners alike, has seemingly never been stronger,” Morassutti said. “Third-party logistics, food and beverage and retail companies are snapping up space as the momentum of online retail sales continues to build.”