While conditions vary among different regions, Canada’s office market remains healthy with the support of a stable economy, Avison Young’s 2018 North America and Europe Forecast report has revealed.
With an inventory comprised of more than 530 million sq.ft. in office space, the country’s overall vacancy rate saw an increase of 20 basis points from 2016. The rate jumped to 11.8% in 2017 due to an imbalance between supply and demand.
Calgary posted the highest vacancy rate of 23.1%, while Winnipeg the lowest at 6.6%. The report also highlights the Waterloo Region, which saw the biggest change by the end of 2017. Vacancy rate in such region increased by 500 basis points to 16.6%.
Vacancy rates are expected to rise by varying degrees in five of Canada’s 11 markets as the uneven demand continues in 2018. The report predicts that the country’s vacancy rate will increase by 40 basis points to 12.2% at the end of such year.
Nonetheless, commercial development is predicted to remain busy despite the ongoing imbalance. Before the close of 2017, approximately 12.5 million sq.ft. in office space was being constructed across the country. This figure mirrors the construction levels by the end of 2016.
Over half of the office projects in the development pipeline will rise in Canada’s biggest commercial real estate market, Toronto.
“Despite the favourable market conditions, there is a sense that we are late in the cycle and a slowdown is inevitable,” said Bill Argeropoulos, principal and practice leader for research at Avison Young. “The commercial real estate sector is having to re-evaluate challenges and opportunities in a technologically transforming world – a world that Canada appears to be making a concerted effort to lead, rather than follow.”
The report, which was published Jan. 11, also noted the growth of co-working spaces across the country, which it attributed to the rising demand for affordable workplaces and flexible lease terms by startups and entrepreneurs. Furthermore, this growth is anticipated to reform the office market’s pricing model.