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Canada : Office vacancy rates to go even higher: report


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Office vacancy rates to go even higher: report

 

Financial Post Published: Wednesday, August 05, 2009

 

Neither Calgary nor Toronto can expect any immediate relief, as both will see millions of square feet of new supply coming onto the market over the next 24 to 36 months (seven million for Calgary and five million for Toronto). Sean DeCory/National Post Neither Calgary nor Toronto can expect any immediate relief, as both will see millions of square feet of new supply coming onto the market over the next 24 to 36 months (seven million for Calgary and ...

 

OTTAWA -- Vacancies in Canada's office market have surged to 8.5% and will climb toward levels not seen since the dot-com bust earlier this decade before finally levelling out, commercial broker Avison Young said in a report Wednesday.

 

"The vacancy rate will definitely be trending up in the coming quarters," said Bill Argeropoulos, director of research at Avison Young.

 

"We're not sure if it will breach the recent high of 11.5% in 2003, but we do see the vacancy perhaps breaching the 10% barrier in the coming quarters and perhaps into 2010, largely because of new supply coming into the market."

 

Furthermore, said Avison Young chief executive Mark Rose: "The global financial crisis has had a significant impact on market psychology, creating inertia and paralyzing decision-making. Recovery . . . will occur only when corporate profits return, unemployment rates drop and decision-makers believe were are trending upwards."

 

In the past 12 months, vacancies have climbed more than two percentage points from the 6.1% rate of mid-year in 2008, and Mr. Argeropoulos said it will likely be the end of 2011 before national rates begin to level off.

 

Mississauga holds the distinction of having the highest office vacancy rate in the country at 10.8%. Toronto experienced the highest annual change among eastern cities, climbing from 6.6% to 9.6% in the past 12 months, a three-year high.

 

Calgary, meanwhile, underwent the highest change in vacancy rates among western cities, soaring from 3.6% in mid-2008 to 9.3% by mid-2009.

 

Neither Calgary nor Toronto can expect any immediate relief as both will see millions of square feet of new supply coming onto the market over the next 24 to 36 months (seven million for Calgary and five million for Toronto). Both will definitely surpass the 10% vacancy rate in the months ahead, Mr. Argeropoulos said.

 

Calgary also saw the largest plunge in rental rates, with downtown Class A space collapsing to $30 per square foot from $46. This is still the most expensive in the country, however, along with Edmonton, where prices are also at $30.

 

Nationally, lease rates for downtown Class A space fell to $22 per square foot in mid-2009 from $25 the year before. Prices ranged from a low of $13 in Quebec City to Calgary and Edmonton's $30.

 

Avison's mid-year office survey tallies results for 12 regions across the country.

 

Canwest News Service

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Unused office space up 75% in Q2: report

 

Garry Marr, Financial Post Published: Tuesday, June 23, 2009

 

The amount of unused office space business put on the sublease market grew by almost 75% last quarter from a year ago, a further indication of the crumbling economy.

 

CB Richard Ellis Ltd. said more than 7.7 million square feet of office space came back into the market across the country, an increase from the more than 4.4 million that hit the market in the same quarter a year ago. The sheer size of the increasing sublease market drove the national vacancy rate to 8.3% from 6.4% a year ago.

 

"The deepening recession has prompted businesses across the country to continue to identify ways to trim overhead and pare back their need for phantom space," said John O'Bryan, vice-chairman of CB Richard Ellis.

 

"The trend of doing with less right now is especially evident in Canada's major office markets. However, it is important to note that the commercial real estate market typically lags behind the residential market by a few months, so we are simply now experiencing the slowdown that other markets went through in the last quarter."

 

Mr. O'Bryan said the Canadian market continues to fare better than United States markets where vacancy rates reached 15.9% at the end of the first quarter. Canadian vacancy rates were only 7.5% at the end of the first.

 

"If we were in the U. S. right now looking at a national occupancy rate of 91.7%, there would be a widespread sense of optimism regarding the health of the country's commercial market."

 

But there are clear signs across the country that the office market has been hit hard by the economy with vacancies rising everywhere.

 

In Vancouver, the beaten-down technology and resource sectors helped drive sublet activity. The effect was to push the vacancy rate from 5.6% to 7.8%.

 

The once-airtight Calgary office market has sprung a leak as lower oil prices have led many of Alberta's junior oil and gas companies to cut their space. In the second quarter, Calgary's vacancy rate rose to 10.2% from 4.6% a year ago. CB Richard Ellis says it will rise to 20% by the end of 2009.

 

Vacancies in Toronto, the largest office market in the country, rose to 8.4% in the second quarter, up from 6.7% a year ago. CB Richard Ellis expects rates to continue to rise in 2009 and 2010.

In Montreal, softness in the commercial market drove vacancy rates up from 8.5% to 9.7%, on a year-over-year basis. The real estate company said cost-containment measures by large tenants have impacted the market.

 

Backed by the federal government, Ottawa is proving to have the best office market in the country. The overall vacancy rate grew to 5.1%, only a slight jump from the 4.9% a year ago. Ottawa's suburban offices, which are more dependent on the private sector, were hit harder than the government-dominated downtown core.

 

[email protected]

 

Here's the complete report : http://www.avisonyoung.com/library/pdf/National/MidYear09-National-Office.pdf

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