Office space in downtown Toronto saw a vacancy rate that rose to 7.2% by the end of 2020, with the national rate at 13.4%, a high last hit in 2004.
“We’re seeing larger, well-capitalized tenants wait for the vaccine to resume operations, while smaller businesses have had to adjust their office commitments in order to meet current challenges,” said CBRE Canada Vice Chairman Paul Morassutti in a statement.
“Without question, there is hardship behind the numbers, but it’s also worth noting that our downtown office markets are moving in a more balanced direction for the first time in a decade.”
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Also, the suburban vacancy rate rose for a third consecutive quarter to 15.3%, marking the highest suburban vacancy rate in Toronto since 2004.
According to CBRE, some occupiers have been allowing their leases to lapse in this intervening period with the intention of evaluating their office space needs once their workforce is able to return to office conditions that more closely resemble pre-COVID working culture.
Toronto didn’t have the highest vacancy office growth, however. While Vancouver was below with 5.8%, Montreal had 10.2%, Calgary had 29.5%, Edmonton had 20.1%, and Ottawa had 9.5%.
Conversely, in Toronto, sublease space continues to return in both the downtown and suburban markets, increasing 79.1% quarter-over-quarter to 5.4 million sq. ft. or 3.2% of total inventory.
“The majority of this sublease space comes from tenants in the travel and tourism, airline, energy, and technology industries downtown, and retail and business services sectors in the suburbs,” the release notes.
When it came to industrial space, Toronto’s industrial availability rate held steady at 2.0% for the third consecutive quarter, despite 12.1 million sq. ft. of new supply in 2020, the largest recorded amount of new construction in a single year.
Meanwhile, Canada’s major industrial real estate markets continue to benefit from “unrelenting demand for space amid a surge in e-commerce and logistics activity.”
“This resulted in the drawdown of 10.4 million sq. ft. of industrial space nationwide, well above the quarterly five-year average of 6.0 million sq. ft. Developers remain bullish on the industrial market, with an additional 26.8 million sq. ft. under construction nationwide,” the release said.
Morassutti said they can’t build industrial space fast enough, and that until the spaces are built, industrial users will have to be creative in order to keep up with customer demand, like converting older industrial space.