CBRE report says office vacancy rate in Q2 rose to highest level since 1994

TORONTO – Canada’s national office vacancy rate rose in the second quarter to the highest level since 1994, according to a report by commercial real estate firm CBRE.

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

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

“Canada’s office markets are battling a perfect storm of a recession threat, rising interest rates, weakness in the technology sector, tenant gentrification and new space supply in office,” CBRE said in a news release.

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

The increase in the overall rate occurred because the downtown office vacancy rate in the second quarter increased to 18.9 percent compared to 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 were higher in all major centers across the country except for Calgary and Ontario’s Waterloo region.

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

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

CBRE said Calgary has benefited from expanding engineering, construction and education sectors.

“Calgary is also working through several office building renovation projects, which will reduce inventory,” the company said.

CBRE said that before the pandemic, Canada had the two lowest vacancy office markets in North America in Toronto and Vancouver, where downtown vacancy has hovered around two percent over the years.

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The company says it has 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.

This report in The Canadian Press was first published July 4, 2023.

The Canadian Press

Note to readers: This is a corrected story. An earlier version misstated the national total, downtown and suburban office vacancy numbers for the first quarter.