Upward pressure on commercial asset values continues to dominate the nation’s largest cities, according to a new study by Colliers Canada.
In its recently released Q1 National Market Snapshot 2021, Colliers said that while the first few months of this year saw renewed lockdowns despite mass vaccinations, “this time, around many businesses knew how to respond, resulting in minimal job losses.”
And although sublet space is still a problem, “the flood of space coming to the market has slowed, and some believe, as 2021 progresses, and employees start returning to the office, we will start to see more sublet offerings being removed from the market,” Colliers said.
On average, asking net office rents continued to increase due to the larger proportion of higher-priced downtown space, especially in Edmonton (up $18.54 per square foot quarter-over-quarter), Regina (up $16.80 PSF), and Ottawa (up $16.74 PSF).
“Asking rents have not decreased as much as expected, as landlords prefer to make concessions like shorter lease terms and free rent,” Colliers reported. “Office tenants facing renewals are asking for shorter terms in order to mitigate the uncertainty related to work-from-home vs. the return to the office.”
The industrial segment also remains a powerhouse market, with sustained demand leading to strong positive absorption, continued vacancy compression, and steadily rising rents.
“Industrial development activity has increased as well,” Colliers said, but the report hastened to add that “it will unlikely be able to keep pace with demand, resulting in a chronic shortfall of industrial space. As such, development proformas include strong rent growth expectations, which is ultimately further driving up land prices.”
Canada’s total industrial availability rate as of Q1 fell by 3.3% quarter-over-quarter, while the average asking net industrial rent per square foot increased by $9.45 during the same period.