Canada Downtown Office Vacancy Hits Record High in 2023 Factors and Regional Resilience
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Canada's national downtown office vacancy rate reached a record high of 19.4% by the end of 2023, according to CBRE, a commercial real estate and investment firm. This rate far exceeds the ideal range of 10 to 12%, reflecting a challenging period for the office market. While the shift to remote work during the COVID-19 pandemic has significantly impacted the demand for office space, other factors play a role. Marc Meehan, Managing Director of Research for CBRE Canada, identifies new supply, economic concerns, and the tech sector as contributors. The influx of U.S.-based tech companies to Canada during the pandemic for affordable labor had initially driven demand, but a subsequent drop in tech valuations led to a halt in hiring and expansion.
Despite the overall high vacancy rate, there are signs of improvement in certain regions. The measure of net absorption, indicating demand for office space, shows positive trends in several cities. For instance, Calgary, with a downtown vacancy rate of 30.2%, experienced a positive net absorption in 2023 after struggling since the 2014 energy crisis. Calgary's success is attributed to a thriving office conversion program that incentivizes the transformation of underutilized office buildings into residential units. While other cities like Vancouver, Edmonton, Ottawa, and Halifax also showed improvements, the impact of substantial new office supply in Toronto had a significant influence on the national vacancy figures.
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