Vacancy rates improved in Canada's office and industrial markets in the first quarter of the year, according to CB Richard Ellis.
The national vacancy rate for office space dropped to 9.3 per cent, compared with 10.1 per cent a year earlier. Tenants leased 704,431 square feet of space, compared with 441,310 last year.
The industrial vacancy rate fell to 7.3 per cent from 8 per cent. Construction also increased, with 5.6-million square feet of space being developed compared with 3.8-million square feet a year ago.
"Each market has its own nuances, but the national trend is positive absorption and lower vacancy rates with steady rental growth," said John O'Bryan, vice-chairman of CBRE.
The commercial real estate market has been improving, as tenants are wooed into new space by lower rents and better amenities. As space is absorbed, landlords hope to be in a position to begin moving rents higher.
"We're seeing no letup in demand from investors in the Canadian commercial real estate market," said Mr. O'Bryan. "They're feeling comfortable about acquiring additional assets because the economic fundamentals in Canada are strong and interest rates are compelling."
A regional snapshot from the report:
Vancouver: The metro office vacancy rate decreased from 10 per cent in the first quarter of 2010 to 9.4 per cent in 2011. The city's industrial market saw a decrease in overall availability in the first quarter of 2011, at 7.2 per cent compared to 8.0 per cent.
Calgary: First-quarter vacancy fell from 15 per cent in 2010 to 12 per cent in 2011. Sublets as a percentage of vacant office space fell to 20.6 per cent in the first quarter of 2011 from 37.6 per cent in the same period of 2010. The industrial availability rate also fell significantly, from 5.8 per cent in the first quarter of 2010 to 4.1 per cent.
Edmonton: Overall office vacancy rate was steady at 10.7 per cent in the first quarter of 2011, compared with 10.6 per cent the previous year; however, the downtown vacancy rate increased from 8.5 per cent in the first quarter of 2010 to 8.8 per cent in 2011. In the city's industrial market, overall availability was 5.1 per cent for the first quarter of 2011, compared with 6.6 per cent the previous year.
Winnipeg: Vacancy increased in the first quarter to 9.1 per cent, up from 8.5 per cent a year earlier. The industrial market saw the availability rate dropping from 4.2 per cent in the first quarter of 2010, to 3.4 per cent.
Toronto: Overall office vacancy rate was 8.7 per cent, down nearly a full point from the previous year's rate of 9.6 per cent. The downtown vacancy rate fell 100 basis points to 6.3 per cent, the largest single quarterly decline in vacancy since the end of 2004, largely due to major landlords taking 300,000 square feet of available space off of the market for renovations and retrofit.
Ottawa: Office vacancy rates for this year's first quarter rose to 6.7 per cent, compared with 5.3 per cent the previous year. In the industrial market, Ottawa showed an increase in overall availability to 6.6 per cent, from 5.7 per cent in the first quarter of the previous year.
Montreal: Office vacancy rate declined from 10.6 per cent in the first quarter of 2010 to 9.6 per cent in 2011. The Montreal industrial market, however, had a very weak first quarter with little new demand, over 50 new significant vacancies and a vacancy rate that climbed more than 100 basis points.
Halifax: Overall vacancy rate for downtown and suburban office space was 8.6 per cent in the first quarter, down from 9.4 per cent a year earlier. In the industrial sector, the overall availability rate was relatively stable at 4.3 per cent in the first quarter of 2011, compared with 4.1 per cent the year prior.