
Canadian Office Market Posts First Year of Positive Absorption Since 2019: CBRE
Canada’s heavily challenged office market posted positive net absorption in 2024 for the first time in five years, according to CBRE.
Positive net absorption totalled 2.6 million square feet, the highest level since 2019, according to the commercial real estate service’s firmCBRE’s latest figures. The result underscored a widespread recovery as eight markets reported gains.
Calgary and Edmonton were standouts, maintaining positive absorption in every quarter of 2024.
The national office vacancy rate remained stable at 18.7% at the end of 2024, recording a slight increase of 20 basis points compared to a year earlier. CBRE predicts that vacancy rates will peak in early 2025, offering further signs of market stabilization.
Downtown and suburban markets displayed diverging trends as trophy-class assets continued to dominate demand, maintaining vacancies between 10% and 11%. In contrast, class B and C buildings faced vacancies nearly two and a half times higher, highlighting a widening gap between premium and lower-tier spaces.
Sublet space availability declined for the seventh consecutive quarter, reaching its lowest level since mid-2022. Six of 10 markets, including Toronto, saw significant reductions in sublet space, with Toronto alone removing about 200,000 square feet from the market. Meanwhile, office construction activity dropped to a 20-year low, with active projects totalling just 3.4 million sf, representing 0.7% of inventory. CBRE attributed the decline to cost pressures and limited new project starts, noting that 90% of current construction is slated for completion in 2025.
Regional performance varied across the country. Compared to the third quarter, Vancouver and Montreal experienced an uptick in activity in the final months of 2024. Ottawa, however, continued to show signs of slowing, with shadow vacancies emerging. Similarly, Toronto and Ontario’s Waterloo Region faced challenges as significant future availabilities hit the market in the fourth quarter.
Amid these mixed signals, CBRE emphasized the growing preference among occupiers for higher-quality office spaces. According to its 2024 Americas occupier sentiment survey, 59% of respondents were considering upgrading their real estate holdings, with many opting for premium, centrally located properties. This trend is expected to increase competition for prime spaces as new supply becomes scarce.
Although the market continues to recover, CBRE noted that conversion projects, including office-to-residential and education facilities, are gradually reducing available inventory. In Calgary, for instance, 342,000 sf of space was removed for conversion in the fourth quarter 4 alone, contributing to a modest decline in vacancy rates.
Photo: CBRE
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