The office vacancy rates in Toronto and Vancouver are set to double by 2023 according to a new report.
Research firm CoStar Group says that the vacancy rate in downtown Toronto, which was at a historic low of 2.9% in the second quarter of 2018, will hit 6% in 2023.
For Vancouver, the rate is also set to hit 6% in 4 years, escalating from 2%.
The reason for the forecasted surge in vacancies is tenants attracted to new units that are becoming available and an increase in rents.
“A lot of the existing landlords that are going to be suffering with higher vacancy in their existing stock,” Roelof van Dijk, director of market analytics, Canada at CoStar told Bloomberg. “They’re the ones that are building.”
The firm says there are 25 new office buildings incoming in Toronto and 15 towers in Vancouver.
Rent growth to ease
As tenants move to new buildings and vacancy rates rise, landlords can expect rent growth to slide.
In Toronto, annual rent growth of 6% currently is expected to continue a downward trend, while the growth in Vancouver which has almost halved in the past year, is expected to cut back to just 1.5% by 2023.