Tenants snap up office space in first quarter

[canarob]

Tenants snap up office space in first quarter

STEVE LADURANTAYE — REAL ESTATE REPORTER
Globe and Mail Update
Published Monday, Mar. 28, 2011 10:14AM EDT
Last updated Monday, Mar. 28, 2011 10:24AM EDT

Vacancy rates improved in Canada’s office and industrial markets in the first quarter of the year, according to CB Richard Ellis.

The national vacancy rate for office space dropped to 9.3 per cent, compared to 10.1 per cent last year. Tenants leased 704,431 square feet of space, compared to 441,310 last year.

The industrial vacancy rate fell to 7.3 per cent from 8 per cent. Construction also increased, with 5.6-million square feet of space being developed compared to 3.8-million square feet a year ago.

“We’ve had a relatively uneventful quarter,†said John O’Bryan, vice-chairman of CBRE. “Each market has its own nuances, but the national trend is positive absorption and lower vacancy rates with steady rental growth.â€

The Canadian commercial real estate market has been improving, as tenants are wooed into new space by lower rents and better amenities. As space is absorbed, landlords hope to be in a position to begin moving rents higher.

“Also, we’re seeing no letup in demand from investors in the Canadian commercial real estate market,†said Mr. O’Bryan. “They’re feeling comfortable about acquiring additional assets because the economic fundamentals in Canada are strong and interest rates are compelling.â€

From the report:

Vancouver: “The metro office vacancy rate decreased from 10 per cent in the first quarter of 2010 to 9.4 per cent in 2011. The downtown office market continues to enjoy historically low vacancy and the suburban office market, although varying in individual submarket performance, has seen increased activity from new tenants and corporate expansions. The Vancouver industrial market saw a decrease in overall availability in the first quarter of 2011, at 7.2 per cent compared to 8.0 per cent.

Calgary: First quarter vacancy fell from 15 per cent in 2010 to 12 per cent in 2011. Sublets as a percentage of vacant office space fell to 20.6 per cent in the first quarter of 2011 from 37.6 per cent in the same period of 2010. The industrial availability rate in Calgary also fell significantly, from 5.8 per cent in the first quarter of 2010 to 4.1 per cent.

Edmonton: Overall office vacancy rate was steady at 10.7 per cent in the first quarter of 2011, compared to 10.6 per cent the previous year, however, the downtown vacancy rate increased from 8.5 per cent in the first quarter of 2010 to 8.8 per cent in 2011. In the city’s industrial market, overall availability was 5.1 per cent for the first quarter of 2011, compared to 6.6 per cent the previous year.

Winnipeg: Vacancy increased in the first quarter to 9.1 per cent, up from 8.5 per cent a year earlier. The industrial market ... saw the availability rate dropping from 4.2 per cent in the first quarter of 2010 to 3.4 per cent

Southwestern Ontario: In London, office vacancy rates remained unchanged at 14.2 per cent compared to the first quarter of 2010. Industrial availability in London increased slightly to 14.2 per cent in the first quarter of 2011, compared to 13.4 per cent in the same period of 2010.

Waterloo Region: Office vacancy rate increased from 6.8 per cent to 7.2 per cent with most of the increase in vacancy occurring in the downtown core. The industrial availability rate in the region fell to 7.2 per cent in the first quarter of 2011, compared to 8.5 per cent during the same period in 2010.

Toronto: Overall office vacancy rate was 8.7 per cent, down nearly a full point from the previous year’s rate of 9.6 per cent. The downtown vacancy rate fell 100 basis points to 6.3 per cent, the largest single quarterly decline in vacancy since the end of 2004, largely due to major landlords taking 300,000 SF of available space off of the market for renovations and retrofit. In Toronto’s industrial sector, the first quarter 2011 availability rate fell even more, to 6.4 per cent from 7.7 per cent during the same period in 2010.

Ottawa: Office vacancy rates for this year’s first quarter rose to 6.7 per cent, compared to 5.3 per cent the previous year. In the industrial market, Ottawa showed an increase in overall availability to 6.6 per cent, from 5.7 per cent in the first quarter of the previous year.

Montreal: Office vacancy rate declined from 10.6 per cent in the first quarter of 2010 to 9.6 per cent in 2011. Montreal's industrial availability rate on the other hand rose nearly a full point to 11.2 per cent for the first quarter of 2011, compared to 10.3 per cent the previous year. The Montreal industrial market, however, had a very weak first quarter with little new demand, over 50 new significant vacancies and a vacancy rate that climbed more than 100 basis points.

Halifax: Overall vacancy rate for downtown and suburban office space was 8.6 per cent in the first quarter, down from 9.4 per cent in the same period of 2010. In the Halifax industrial sector, the overall availability rate was relatively stable at 4.3 per cent in the first quarter o 2011, compared to 4.1 per cent the year prior.â€

 

[taal]

meh, the Toronto drop is probably very much due to the 300K going off the market, so that probably means nothing.

I'm very much looking for office market reports for Q4 2010 - it's too early for Q1 2011. I only found 1 from CRBE.
Anyone know where you can find others ?

 

[Automation Gallery]

Sure it means something..even at 9.6 vacancy rates its one of lowest of big North American cities..recently Toronto has built, BAC-1, Telus, PWC, and now the 30 storey Bremmer tower (under construction) and our office vacancy rates have not skyrocket..like i said before it wont be long before we hear more announcements for more big office towers. taal i think its time to change your tune, all along throughout the years all i have read from you is that the Toronto office demand is in the tank...meanwhile we just keep on building.

 

[taal]

Sure it means something..even at 9.6 vacancy rates its one of lowest of big North American cities..recently Toronto has built, BAC-1, Telus, PWC, and now the 30 storey Bremmer tower (under construction) and our office vacancy rates have not skyrocket..like i said before it wont be long before we hear more announcements for more big office towers. taal i think its time to change your tune, all along throughout the years all i have read from you is that the Toronto office demand is in the tank...meanwhile we just keep on building.

Sorry let me clarify! The majority of my ranting is focused on the outer 416 suburbs ... while I do go on about downtown sometime, ensuing that we may have seen even more development. The crux of my point is everything but downtown in the 416 - and it's pretty hard to argue against that isn't it ? I mean, simply put, name one development in the last 10 years - you may be able to name 1 or 2.

Now regarding downtown. Without a doubt, we've been doing a lot better then just about all analyst in this industry predicted 2/4 years ago - which as you pointed out was the flood of new office space would cause a massive rise in vacancy rates. It didn't happen, well not to the degree they predicted.

But I should note - there are massive vacancies in some of our grand old towers. Commerce court for example, has something along the lines of 400,000+ square feet of space i.e. it's nearly 50% vacant. I thought there were a lot in the TD complex but it looks like some of that has been taken - i.e. some of the buildings 20/30% but it used to be more.

Anyway, yea it's possible we'll see new construction, but on top of 16 York (or whatever it is called) not sure about that.
Tenants love to gobble up new space ... this makes the older buildings less prestigious over time unfortunately but that's a matter of life - they're need to drop there rental rates and start attracting the second top notch clients, not the top

I'm watching some developments in the outer fridges i.e. the Queen Richmond Center proposal - which I'd love to see, but it looks like they haven't managed to find a major tenant yet. Also, there's the space on the waterfront - to me that'll really be a key indication.
A lot of the condos being proposed have huge office components in there base (and there are some standalone office buildings) for this area to thrive we need office development. But I'm curious, who will take up the space. I doubt it'll be banks - I was thinking software companies and the like but a lot of these are in the 905 (Markham and Mississauga).


If you look at all the new construction, even PWC building that is just completing, they're all nearly full (80% or higher) and the demand for new space is high. So maybe we'll see more just because of this.


Anyway, again, my rants are about the rest of Toronto - not downtown for the most part.