A recent report by CBRE, a commercial real estate firm, reveals that office vacancy rates in Toronto have experienced a significant increase in the last quarter reaching its highest level since 1994.
On Tuesday the firm announced that the vacancy rate rose to 18.1 per cent in the second quarter, compared to 17.8 per cent in the first. In comparison, the first quarter of 1994 saw a vacancy rate of 18.6 per cent.
“Canadian office markets are grappling with a perfect storm of a recession threat, interest rate hikes, tech sector weakness, tenants rightsizing and new supply of office space,” CBRE said in a press release. “All of this is compounded by the continued uncertainty around remote work.”
Except for Calgary and the Waterloo region in Ontario, CBRE reported a slight increase in downtown vacancies during the second quarter across all major centres in the country.
Calgary experienced a decrease in its downtown vacancy rate, which landed at 31.5 per cent in the second quarter, down from 32 per cent in the first quarter. Similarly, the downtown vacancy rate in the Waterloo Region dropped to 21.5 per cent from 22 per cent in the previous three months. CBRE attributed Calgary’s improvement to the growth of the engineering, construction and education sectors.
According to the CBRE, prior to the pandemic, Toronto and Vancouver boasted the two lowest-vacancy office markets in North America. While the downtown vacancy rates in these cities remained around two per cent for several years.
CBRE also reported that there is a considerable amount of office space currently under construction in Canada. Approximately 11.5 million square feet of office space is being developed, with notable projects including 6.2 million square feet in Toronto, 2.7 million square feet in Vancouver, and 1.9 million square feet in Montreal. These construction projects indicate continued investment and development in the office market despite the challenges posed by the pandemic.