Tech sector drives demand for office space in Toronto, Vancouver and Montreal
The office vacancy rate in downtown Toronto has hit a record-low amid strong demand for work space by the burgeoning tech sector, according to a report by CBRE Group.
The commercial real estate services and investment firm says the vacancy rate fell to 2.7 per cent in the fourth quarter of 2018 in Canada’s largest city due to a “chronic shortage” of office space.
In Toronto, commercial rental rates have surged to $35.37 per square feet in the same period, up $2.50 per square feet from the third quarter.
Comparatively, rental rates were $37.20 per square feet in Vancouver, where the vacancy rate is 3.8 per cent. In Montreal, rental rates were $22.76 per square feet and the vacancy rate was 9.4 per cent.
CBRE says demand has been outpacing supply across the country.
The national office vacancy rate tightened by 50 basis points quarter-over-quarter to 11.9 per cent over the period, helped by a growing suburban office market particularly in Calgary and Waterloo, Ont.
Total net absorption nationwide — the total amount of space that tenants moved into minus the total amount of space which tenants moved out of over the period — totalled 2.7 million square feet last quarter, which was more than double the amount of new space delivered across the country.
Positive net absorption was recorded in nine of the 10 Canadian office markets.
By the end of 2018, there was 14.2 million square feet of new commercial space being developed across the country, the highest level seen since the first quarter of 2016.
The majority of that new office space was concentrated in downtown Toronto, Vancouver and Montreal.
Toronto had 7.3 million square feet under construction in the fourth quarter of last year, up nearly 1.3 million square feet from the previous quarter; while Vancouver had 2.86 million square feet and Montreal had 954,510 square feet under construction.
CBRE says the technology sector is a major contributor to increased rates of leasing for downtown office space in Toronto, accounting for 20 per cent of pre-leased space out of the 9.1 million square feet in new planned development.