Tenants Seek Hot Deals as Canadian Office Market Cools
While the office market is strengthening stateside, the sluggish demand for office space in Canada may continue, according to real estate services firm CBRE. Vacancies outdid leases across the country during the first quarter of 2014—by 1.5 million square feet. That’s the fifth consecutive quarter that the demand for space in existing buildings has been weak.
That means Canadian office tenants could clean up when it comes to negotiating their leases. The reduced demand for office space should give tenants more leverage over owners.
The rebound in leasing activity that followed the recession was short-lived, and the current pace is likely much closer to the new norm, said CBRE officials. The national office vacancy rate now stands above 10 percent for the first time since the second quarter of 2010, and has reached its highest level since the third quarter of 2005. Calgary, Edmonton, Winnipeg, London, Montreal, and Halifax have been affected.
CRE experts have blamed less than ideal job growth for the lack of office demand. Since the middle of last year the average number of jobs created each month has been about 5,000, compared with about 15,000 historically, CBRE says.
Meanwhile, Canada’s industrial leasing market is actually getting stronger, which has been credited to retail growth. Across the country, industrial markets continue to benefit from retailers setting up new distribution centers, notes CBRE.
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