July 28, 2010
Economic Snapshot
Office vacancy rates hit five-year high, despite uptick in office jobs
JOHN CLINKARD
consulting economist, CanaData
The national office vacancy rate reached 9% in the second quarter of 2010, continuing a trend that started in the fourth quarter of 2008. This rate was up from 8.8% in the first quarter and was its highest level since the second quarter of 2005.
According to the most recent numbers from Cushman & Wakefield, the increase was largely due to the addition of 1.5 million square feet of new supply. And it occurred despite the fact that 911,800 square feet of space were absorbed in the quarter.
The office vacancy rate retreated slightly in Calgary (from 13.4% to 13.3%) and Winnipeg (from 9.3% to 9.0%) but increased in the remaining eight major metro areas.
Among the 10 largest census metro areas, St John’s, N.L. had the lowest office vacancy rate in the country (5.5%), despite a significant decline in office-based employment over the past year.
Ottawa recorded the second lowest office vacancy rate (6.6%) due in large part to a strong (+7.6% year over year) increase in office-based employment in the second quarter.
Other major metro areas with below (national) average vacancy rates in the second quarter included: Saint John, N.B. (7.9%), Toronto (8.1%), and Vancouver (8.4%).
In Montreal the office vacancy rate increased from 9.1% to 9.2%, its highest level since the third quarter of 2007.
The office vacancy rate for the 10 largest metro areas in Canada is now at its highest level in five years, and year-to-date commercial building permits are down by 3.5% year over year in May.
As such, the near-term outlook for new office construction is quite guarded.
The outlook is further clouded by the concerns about the health of the U.S./global recovery.
Having said this, the relative strength of office-based employment in Ottawa, Montreal, Toronto and Vancouver continues to point to a pickup in office construction late in 2010 or early in 2011.
John Clinkard has over 30 years’ experience as an economist in international, national and regional research and analysis with leading financial institutions and media outlets in Canada.
Data sources: Statistics Canada and Cushman & Wakefield
Chart: Reed Construction Data – CanaData.
