TORONTO (Reuters) - Vacancy rates in Canada’s commercial real estate market rose in the third quarter and a recovery in the sector is still months away as the country pulls out of the recession, a CB Richard Ellis report showed on Monday.
The overall year-over-year vacancy rate for both downtown and suburban office markets climbed to 9.4 percent from 6.3 percent, CBRE said in its third-quarter report on national office and industrial trends.
CBRE, the world’s largest commercial real estate services firm, said limited job creation in Canada’s white-collar sector and new office inventory were the main reasons for the increase in the quarter.
Vacancy rates rose most noticeably in larger downtown office markets, namely Vancouver, Calgary and Toronto.
In Toronto, home to the country’s Big Five banks, two new buildings were completed in the quarter to add 1.35 million square feet of space. An additional 780,000 square feet of space is expected to come online in the fourth quarter. The city’s vacancy rate rose to 9.1 percent from 6.6 percent year-over-year in the third quarter.
In Calgary, the country’s oil and gas capital, vacancy rate jumped to 13.1 percent from 4.7 percent as the recession and falling oil prices underscored how the city’s energy sector and commercial real estate market are “inexorably linked.”
“Canada’s downtown office market is doubly burdened by a surplus of space, with buildings currently under construction and a swell of inventory that will continue to be added to the market -- a reality not fully reflected in this quarter’s vacancy numbers,” said John O‘Bryan, vice-chairman at CBRE.
“These conditions of burgeoning space are expected to negatively impact vacancy rates for some time, at least until economic fundamentals are restored and employment figures resume in sectors that typically occupy downtown office space.”
Meanwhile, Vancouver’s vacancy rate increased to 8.9 percent from 5.4 percent, although limited new development in the downtown office market has helped steady conditions in the Pacific Coast city.
Vacancy rates in smaller office markets, such as southwestern Ontario’s Waterloo Region and London, rose at a slower pace than the large markets, partly because municipal, provincial and federal government tenants have added some measure of stability, the report said.
Reporting by Ka Yan Ng; editing by Rob Wilson