Office vacancy rates in downtown Toronto and Vancouver are ebbing for the first time since the beginning of the pandemic as tech companies and others seek more space in anticipation of a recovery in activity in the country’s downtown cores.
According to a new report from commercial real estate services firm CBRE, Toronto office vacancy rates fell in the third and fourth quarters last year, while Vancouver recorded its first drop in vacancy rates in the fourth quarter.
Online grocery shopping service Instacart is one company that has moved to increase its footprint, saying on Wednesday it signed a lease in the fourth quarter to double its Toronto office space. San Francisco-based online wholesaler Faire and Canadian law firm Polley Faith LLP are also some of the businesses that either took sublet space or signed new office leases in downtown Toronto in the final quarter of last year.
“We chose to double down on our investment in Toronto office space as we fully expect that the city will recover and return to being an important hub of activity, and we want to be well positioned for the future,” said Mark Polley, partner at Polley Faith, whose firm, like Instacart, is doubling its existing space.
In Vancouver, fintech company Tipalti Canada Inc., parking mobile app PayByPhone and business intelligence software seller Klue Labs signed leases or took sublet space in the downtown area, according to commercial real estate services firm CBRE.
Even with the surge in COVID-19 Omicron cases preventing a widespread return to the office, leasing brokers said companies are still looking for long-term office space in the two cities.
The office vacancy rate for downtown Toronto fell to 9.7 per cent in the fourth quarter from 9.9 per cent in the third, according to CBRE data. That occurred even as new office skyscrapers opened and flooded the market with additional space. In Vancouver, the office vacancy rate fell to 7.2 per cent in the fourth quarter from 7.6 per cent in the third.
Before the pandemic saw workers leave the office in large numbers, Toronto had a vacancy rate of 2 per cent in the first quarter of 2020, while Vancouver had 2.2 per cent of its office space unoccupied.
“We have seen a huge pickup in demand for Toronto and Vancouver,” said Jon Ramscar, CBRE’s managing director for downtown Toronto. “We are not seeing it slow down,” he said.
After the pandemic started, tech companies were some of the first businesses that tried to get rid of office space by putting it up for sublet. That pushed vacancies to levels not seen since the financial crisis that hit in 2008.
The trend started to turn around in the spring of 2021 when companies either took back the space they were trying to sublet or successfully sublet their space to another business. Now brokers expect tech companies to revive Toronto and Vancouver.
“The pandemic has accelerated the digital transformation of our businesses and economy,” said Juana Ross, Toronto research director for commercial real estate services firm Cushman & Wakefield. “We are looking at tech leading the recovery and becoming one of the biggest demand drivers in office using space in Toronto for the foreseeable future,” she said.
In most of the other major Canadian cities, the office vacancy rate continued to rise. Calgary hit a record high of 33.2 per cent in the fourth quarter as it continues to deal with the impact of the shrinking energy sector, according to CBRE.
Edmonton reached 21 per cent and Montreal rose to 13 per cent in the final quarter of 2021. The Waterloo, Ont., region recorded the steepest increase, rising to 27 per cent in the fourth from 22 per cent in the third quarter, according to CBRE.
Ottawa, however, saw its vacancy rate fall to 9.9 per cent from 10.5 per cent over the same time period.
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