All of Western Canada’s office markets have reported an increase in leasing activity, reflected in decreasing vacancy rates. However, falling demand in metro Calgary has led to compressed rental rates.
Vancouver and Calgary saw increases to their inventory but their vacancy rates dropped, according to a new report by Colliers International. Vancouver saw its vacancy rate drop for the eighth straight quarter, from 6 per cent in the third quarter of 2017 to 5.8 per cent in the fourth quarter. New supply from The West Tower at Rogers Arena (70,000 square feet), One Burrard Place (150,000 square feet) and 400 West Georgia (350,000 square feet) is not anticipated to meet user demand.
The downtown Calgary office market experienced another year of increasing vacancy in 2017 but there were some positive signs of recovery. For the first time since 2012, Colliers International recorded two consecutive quarters of positive absorption in the second and third quarters. The final quarter of 2017 brought this cycle to an end with 266,000 square feet of negative absorption. Accordingly, vacancy ballooned to 27.4 per cent in the fourth quarter of 2017, and posted an average net rent of $14.50 per square foot – less than half of Vancouver’s average rate of $31.89.
Edmonton turned a corner in the final quarter of 2017, recording its first period of positive absorption since early 2015. Tenant growth led to a decreased office vacancy of 17.2 per cent and an average rent of $18.10 per square foot.
Toronto recorded over half a million in positive absorption in Q4 2017, led by AAA Class product. High quality product continues to drive up demand and lease rates.