The national office vacancy rate nudged up 10 basis points (bps) in the third quarter of 2024, hitting 18.6 per cent, with the delivery of slightly more than 1 million square feet of new supply. CBRE Canada reports 53,000 square feet of negative absorption across the 10 major markets it surveys.
Montreal, Vancouver and Ottawa all saw more space empty out, while Toronto registered about 650,000 square feet of positive absorption almost equally divided between downtown and suburban markets. Differentiating farther, CBRE analysts note that vacancies in top-tier Class A office have fallen to the lowest level since the third quarter of 2020, down to 10.1 per cent nationally, but the tenant drain continues in Class B and C buildings as the national vacancy rate surpassed 25 per cent over the summer.
Among markets, Vancouver posts the lowest office vacancy rate, at 10.9 per cent, and commands the highest average net rent, at $39.24 per square foot (psf). Vancouver’s average downtown Class A net rent stands at $45.97 psf, compared to $34.75 psf for comparable space in Toronto or $23.86 psf in Montreal. The downtown Class A vacancy rate is 10.6 per cent in Vancouver, 14.5 per cent in Montreal, 15.5 per cent in Toronto and 24.7 per cent in Calgary.
Canada-wide, more than 5.7 million square feet of new office space has been completed thus far in 2024, exceeding the full-year delivery of new product in both 2023 and 2022. However, new starts in third quarter amounted to just 30,000 square feet of future office space, down dramatically from a quarterly average of 1.6 million square feet in 2019. The third quarter also saw 674,000 square feet of office inventory taken off the market for conversion to other uses, adding to the cumulative total of 6.9 million square feet since 2021.
CBRE reports the national industrial availability rate climbed 20 bps to 4.4 per cent over the course of the summer, as 1.9 million square feet of positive absorption trailed the arrival of 7.3 million square feet of new supply. The average asking lease rate dipped to $15.67 psf, down from $15.95 psf in the second quarter.
Across the 10 markets CBRE surveys, the average availability rate ranges from 2.6 per cent in Ottawa to 6.7 per cent in Halifax. Average net asking rent ranges from $20.28 psf in Vancouver to $10.20 psf in Edmonton.
More than 32 million square feet of new industrial space is in progress across 10 major Canadian markets, with about 44 per cent or more than 14 million square feet being built in the Greater Toronto Area. More than 7.3 million square feet of new industrial product has also been delivered in the GTA thus far in 2024, with nearly 3 million square feet of that arriving in the third quarter. With a 4.2 per cent availability rate, the GTA commanded average net asking rents of $17.56 psf in the third quarter.
Calgary enjoyed a nation-leading 1.45 million square feet of positive absorption in the summer months. Waterloo Region also experienced strong leasing activity with about 865,000 of positive absorption. On the flipside, Montreal saw 1.1 million square feet of negative absorption; an extra 373,000 square feet of space emptied out in Vancouver; and 481,000 square feet of negative absorption in the London, Ontario market equates to 1.1 per cent of the inventory.
