CBRE Report Says Office Vacancy Rate in Q2 Rose to Highest Level Since 1994

Office towers, condos and apartment buildings are seen in downtown and the west end of Vancouver, on Jan. 19, 2023. The Canadian Press/Darryl Dyck

The national office vacancy rate in Canada climbed in the second quarter to its highest level since 1994, according to a report by commercial real estate firm CBRE.

The firm said Tuesday that the national office vacancy rate rose to 18.1 percent in the second quarter, up from 17.8 percent in the first quarter.

It was the highest level since the first quarter of 1994 when it was 18.6 percent.

“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 news release.

“All of this is compounded by the continued uncertainty around remote work.”

The increase in the overall rate came as the downtown office vacancy rate in the second quarter rose to 18.9 percent compared with 18.5 percent in the first quarter. The suburban office vacancy rate was 17.1 percent, up from 16.9 percent.

CBRE said downtown vacancies in the second quarter inched higher in all major centres across the country except for Calgary and the Waterloo region in Ontario.

The downtown vacancy rate in Vancouver was 11.5 percent in the second quarter, up from 10.4 percent, while the rate in Toronto was 15.8 percent, up from 15.3 percent in the first quarter. Montreal saw its downtown rate rise to 17.0 percent from 16.5 percent.

Meanwhile, the downtown vacancy rate in Calgary was 31.5 percent, down from 32.0 percent in the first quarter. Waterloo Region’s downtown rate was 21.5 percent compared with 22.0 percent in the first three months of the year.

CBRE said Calgary has benefited from the expansion of the engineering, construction and education sectors.

“Calgary is also working its way through several office building conversion projects, which will reduce inventory,” the firm said.

CBRE said that before the pandemic, Canada claimed the two lowest-vacancy office markets in North America in Toronto and Vancouver, where downtown vacancy hovered around two percent for several years.

The company said there is 11.5 million square feet of office space under construction including 6.2 million in Toronto, 2.7 million in Vancouver and 1.9 million in Montreal.