Office space vacancy in Toronto is up, while rent drops, due to the COVID-19 pandemic, but the industrial market still remains “robust.”
According to the CBRE’s second quarter statistic report, Canada’s major office markets saw vacancy rates and subletting activity increase during this period while office rents dropped slightly.
Meanwhile, the nation’s top industrial real estate markets “powered forward” with new space coming online in time to service an accelerating e-commerce demand.
The most significant shifts were in Vancouver and Toronto.
Toronto’s downtown office vacancy rose to 2.7% in the second quarter, up from 2% in the first. The city has 650,000 sqft of vacant office space available for sublet, which was an 86% jump from the previous quarter.
When it comes to rent, downtown Class A net rents in Canada’s largest city dropped $1.53 to $35.38 per sqft.
“After a multi-year run of falling office vacancy and rising rents, we are witnessing the beginning of a shift in momentum. While COVID-19 has created some uncertainty in the office markets, rising sublet availability remains modest, with only a few companies adjusting to changing market conditions at this stage. The markets continue to be underscored by tight and competitive fundamentals,” Jon Ramscar, CBRE’s executive vice president and managing director, said.
“It remains early in the trajectory of the virus to forecast its impact on vacancy and rental rates, with some markets still on lockdown, but it is clear tenants will likely have more opportunity to take advantage of longer decision-making timelines.”
CBRE’s report tells a different story about Canada’s industrial real estate — a sector that may be gaining momentum in the wake of the pandemic.
Toronto’s industrial availability rate also increased in second quarter to 2%, up from 1.6% in the previous quarter, partially owing to the delivery of 5.4 million sqft of industrial space since the start of the year, where gains in these properties exceeded the space returned to market.
Like in Vancouver, industrial net rents continue to rise in Toronto, increasing to $9.71 per sqft in the second quarter, up $1.09 from just two quarters earlier.
So while the office real estate market remains unpredictable, the industrial market shows promise and could “come out ahead” in the aftermath of the pandemic.