Canada’s commercial real estate sector is being reshaped by the fast-growing technology and ecommerce industries.
The first quarter of 2019 saw continued high demand for industrial units and offices with real estate firm CBRE reporting record highs in its Quarterly Statistics Report.
“Canadian office markets continue to gather momentum, in large part as a result of rapidly growing tech and co-working sectors. The remarkable office market momentum continues to build, but tenants have fewer and fewer options if they don’t plan ahead,” commented CBRE Canada Vice-Chairman Paul Morassutti.
Downtown Toronto office vacancy tightened another 10 bps, dropping the rate to a new record low of 2.6% in the first quarter.
Montreal’s downtown office vacancy now sits at 8.6%, the lowest it has been since Q4 2013, with tech company growth playing a key role in this decline.
And in Calgary, there was 289,515 sq. ft. of positive net absorption of downtown office space in Q1 2019, the largest quarter of positive absorption since the oil downturn in 2014.
The national industrial availability rate dropped to a new record low of 3.0% in Q1 2019.
National industrial development is at its highest level since 2015 with 22.6 million sq. ft. of industrial space under construction; mostly in Toronto and Vancouver.
Builders are working to meet user demand for taller clear heights, larger door counts, and specialized warehouse configurations.
“Industrial developers are responding to chronic space shortages with new construction, while tenants are opting to secure space prior to construction completion. In Toronto, all new supply delivered in Q1 2019 was pre-leased, and 77.6% of the 9.58 million sq. ft. under construction already has tenancies in place,” added Morassutti.
Among the highlights in Q1, 2019:
- Toronto’s industrial market, which has had 16 consecutive quarters of positive net absorption, saw its availability rate hit an all-time low of 1.5% in Q1, with 2.2 million sq. ft. of positive net absorption.
- Calgary’s industrial market, which has logged nine consecutive quarters of positive net absorption, had a further 649,080 sq. ft. of space taken up in the first quarter of 2019.
- The Halifax industrial market had 50,465 sq. ft. of positive net absorption in Q1, the ninth straight quarter of positive net absorption for that city.
“In recent years, the Canadian real estate market had been somewhat polarized between areas of pronounced strength and areas facing challenges; however, this quarter showed more momentum for cities across the country, including hard-hit Alberta,” said Morassutti. “It’s worth noting that while overall office vacancy has remained stable quarter over quarter in Edmonton and Calgary, the amount of sublet space on the market – which serves as a bellwether for the office segment – decreased by 25.1% and 8.6% respectively. This is a promising indication that Alberta’s CRE conditions look to be improving at long last.”