TORONTO—Canada’s major office markets saw leasing momentum shift into a higher gear in the final quarter of 2021 with office vacancy rates falling in Vancouver, Toronto and Ottawa.
The results were reported in CBRE’s Q4 2021 Canada Office Figures report. With 1.7 million square feet of office space absorbed nationwide, it was Canada’s first quarter of positive net absorption since the onset of the pandemic.
Downtown vacancy fell in Vancouver (7.2 per cent), Toronto (9.7 per cent) and Ottawa (9.9 per cent) in the fourth quarter. CBRE reports those cities boast the three lowest downtown vacancy rates in North America.
The amount of sublease space available for rent in downtown markets declined 18 per cent from the Q1 2021 peak, and vacant sublets in the fourth quarter represented just 3.0 per cent of the total national office inventory. Toronto and Montreal are seeing especially high demand for quality builtout sublet office spaces.
“The resurgence in leasing activity over the last quarter tells us there is a much deeper level of pent-up demand for flexibility and quality at an attractive price point than many perceive,” said CBRE’s Toronto downtown managing director Jon Ramscar in a release. “Landlords are having success when they use model suites, and some are building out blocks of their vacant space in advance to entice tenants in the market to compete with the few quality sublets remaining.”
Office occupancy gains were highest in Toronto, Vancouver and Ottawa, where new office towers were completed with high levels of pre-leasing. Canada recorded 2.4 million square feet of new supply delivered nationwide in the fourth quarter, 70 per cent of which was pre-leased upon completion. Construction of office space has tapered off nationally, however, with just 14.9 million square feet of active development, versus 17.5 million square feet a year before.
The report said the “flight to quality” remains a prevalent theme in downtown Toronto as tenants compete for high-quality, built-out space. The demand has decreased the amount of sublease space available in the market, pushing down its percentage of overall vacancy to 25.7 per cent in Q4 from its all-time high of 41.2 per cent in Q1 2021.