Q1 | 2009 C O L L I E R S I N T E R N AT I O N A L | O F F I C E M A R K E T
Canadian
Snapshot Slowing global and Canadian economic conditions are now evidenced in the Canadian office market, although not to same degree in all cities. Canada’s largest office markets have begun to see both direct and sublet vacancy begin to rise with the exception being Montreal where to date the picture is stable. The spotlight remains on Toronto and Calgary as both markets prepare to digest large amounts of new supply, and to a lesser degree Vancouver, where an early surge in sublet space was cause for concern. Beyond the challenges of new supply, demand levels are clearly an area of concern for landlords, and Q1 has seen a sharp uptick in the ratio of sublet space to total vacant space.
Top 5
Market
Occupancy Cost Toronto Calgary Vancouver Edmonton Ottawa
It is generally accepted that sublet space - as a percentage of vacant space - is a leading indicator for the health of the office leasing market, signaling a pullback of tenant demand, and creating pressure on rates as subsidized sublet deals become available. The percentages cited for each city should be viewed in context as the overall vacancy is so low in some markets that a small amount of sublet space drives the ratio upward sharply.
$54.30 $52.00 $48.00 $46.10 $45.50
Top 5
Vacancy Rate
Overall, Q1 2009 has seen average asking rents begin to move downward and vacancy levels rising. Business confidence and resulting investment and employment levels have been battered by falling commodity prices, as well as a steep decline in demand from United States consumers. Based on the latest Conference Board forecast real GDP is projected to go negative in 2009, with annual growth of (0.5%), and a return to healthier performance in 2010. Demand for office space will remain soft until economic activity rebounds, and companies begin ramping up staffing levels as well as look at absorbing more space. Overall the Canadian markets were very healthy coming into the economic downturn, and are expected to see a healthy bounce once corporate Canada regains its’ confidence.
Saskatoon Vancouver Edmonton Ottawa Calgary
CLASS A - OFFICE RENT
0.8% 2.0% 2.8% 3.0% 3.8%
Indicators
Vacancy Rate 5.9%
Downtown - Gross Rent $47.00
Suburban - Gross Rent $30.80
Sublet Space as % of Vacant 19.5%
CLASS A - OFFICE VACANCY 12.00%
$50.00 10.00% $46.00 8.00% $42.00 6.00%
$38.00
4.00%
$34.00
2.00%
$30.00
0.00%
$26.00 2006
2007 Downtown Market
www.collier s.com
2008 Suburban Market
2009 YTD
2006
2007 Downtown Market
2008 Suburban Vacancy
2009 YTD