Office markets in Canada remain quite tight. Nine cities monitored by Cushman & Wakefield LePage are all showing central-core office vacancy rates at near record lows. The national figure is a remarkable 4.2%. The city in the country with the lowest downtown vacancy rate is St. John’s Newfoundland, at only 1.9%. Vancouver (2.3%), Edmonton (2.8%), Halifax (3.1%) and Toronto (3.8%) are also strapped for office space.

Among the aforementioned cities, Toronto has been the only one to show strong new office building construction underway or planned in this cycle. Calgary has also experienced an expansion of office space and has now stepped back to a vacancy rate of 4.4%. The weakest markets are Montréal (5.7%) and Winnipeg (6.1%), although they are carrying historically low numbers.

Most analysts are anticipating the pendulum in commercial markets to swing away from the robust times of the past couple of years. The good news is that this will clearly not be accompanied by the levels of excess inventories that crippled activity levels in previous downturns. This cycle has not seen the kind of massive overbuilding that delayed recovery for many years on several previous occasions.

Admittedly, suburban office markets have a little more room. In the suburbs, three cities have vacancy rates above 10% − Halifax (11.9%), Montréal (11.1%) and Winnipeg (11.0%). Again, St. John’s (3.6%) is the market with the least excess space, followed by Edmonton (6.8%), Toronto (6.9%) and Calgary (8.3%). Ottawa (8.4%) and Vancouver (8.5%) round out the nine cities. The national suburban vacancy rate is 8.4%.

The greatest year-over-year gross rent increase has occurred in Vancouver (+30.1%). In second place, Montréal (+11.0%) has done a little catching up. In every other city, the latest annual rise in gross rents has been below 10%, with a national increase of 7.7%. Calgary rents have leveled off, after nearly doubling between 2005 and 2007. It was in 2006 that office rents, particularly in western Canada, had their most dramatic gains.

As for the current office-based jobs market, there are three major sub-categories of employment. Two of these are still showing good year-over-year employment gains: professional, scientific and technical services (+3.9%) and finance, insurance and real estate (+1.6%). The third, information, culture and recreation (-3.0%), has been moving in the wrong direction. In the United States, all three categories are recording year-over-year declines.

Alex Carrick