Calgary and Edmonton experienced an uptick in office leasing activity in all four quarters last year and were contributors to 2.6 million square feet in positive absorption across Canada’s major markets. CBRE Canada’s newly released data for the fourth quarter of 2024 pegs the national office vacancy rate at 18.7 per cent at year-end with the downtown continuing to be looser than the suburbs in all markets except Toronto and Montreal. Meanwhile, the divide between trophy assets and Class B/C space has stretched to 1,470 basis points (bps).
Among the 10 markets CBRE analyzes, Vancouver continues to boast the lowest overall vacancy rate, at 11.2 per cent, and command the highest average Class A net rents, at $38.46 per square foot (psf). Nationally, the average Class A net rent sits at $25.74 psf, varying from $29.41 psf downtown to $20.25 in the suburbs.
At year end, eight of 10 markets were on the upside for office absorption, with just the smaller Ontario markets of London and Waterloo in negative status. However, negative absorption in Q4 also ate into overall pluses for Winnipeg, Toronto and Ottawa. Vancouver posted the largest uptick for the year, with 807,000 square feet of absorption. Elsewhere, the tally ranged from 493,000 square feet in Calgary to 144,000 square feet in Ottawa.
“This is the first year of positive net absorption for the office market since 2019,” CBRE analysts note. “While the last two quarters of 2024 were neutral to slightly negative in terms of net absorption, this slowed activity was unable to undo significant momentum from the first half of the year.”
The new construction pipeline steadily contracted over the course of 2024, ending the year with 3.4 million square feet of space still in progress for future completion. Nationally, 6.8 million square feet of new office space came onto the market last year, predominantly adding inventory in Toronto (2.7 million square feet), Vancouver (1.9 million square feet) and Montreal (1.6 million square feet). Toronto is also set to receive nearly 2.4 million square feet of office space still under construction.
Despite about 347,000 square feet of negative absorption in the fourth quarter, Toronto recorded positive absorption of 440,000 square feet for the full year. The market-wide average office vacancy rate rose to 19.7 per cent by year-end with the downtown Class A rate at 16.7 per cent. Average net rents for downtown Class A also moved up during Q4, reaching $35.46 psf.
Vancouver ended the year with an overall vacancy rate of 11.2 per cent, with downtown Class A office space at a tighter 9.4 per cent and commanding average net rents of $45.51 psf. Q4’s quotient of new supply — 218,350 square feet — was confined to the suburbs, where more than 550,000 square feet of office space is still under construction. Just 30,000 square feet is pending downtown.
Downtown Montreal registered 156,000 square feet of net office absorption for Q4, helping to pad the downtown tally to more than 1 million square feet of positive uptake for the year. That’s in contrast to more than 767,000 square feet of negative absorption in suburban markets over the course of 2024. At year-end, Montreal’s overall vacancy rate held steady at 19.5 per cent, with the downtown Class A vacancy rate at 14.1 per cent. Average Class A net rents downtown are pegged at $25.81 psf.
Calgary posted 338,000 square feet of office absorption for Q4 and 493,000 square feet for the year. Slightly more than 127,000 square feet of new office supply came onto the market in 2024 and about 71,000 is under construction — all in the suburbs, which outperforms the downtown office market. A suburban Class A vacancy rate of 19.5 per cent is 540 bps lower than for comparable downtown space. Meanwhile Class A suburban space commands average net rents of $20.17 psf versus $19.10 psf downtown.
About 3 bps of Calgary’s falling vacancy rate in Q4 is attributed to 342,000 square feet of inventory that was removed for conversion purposes. Across all office markets, about 2.4 million square feet of conversion activity was launched in 2024, but Calgary was alone in seeing activity during the fall months.
