TORONTO, ON--(Marketwired - January 10, 2017) - The amount of overall office space leased in Canada's major Central Business Districts (CBD) in 2016's last quarter reached 881,000 square feet (SF) -- marking a return to expansionary momentum that should carry into 2017. While good news -- and a potential harbinger of a better year ahead -- in releasing its Q4 2016 results today, Cushman & Wakefield cautioned that the performance of individual markets will still vary significantly throughout 2017 depending on demand drivers and the impact of global economic dynamics.
Once again, Vancouver, Toronto, and Montreal led the pack through 2016. The CBDs within these cities saw strong expansionary momentum, driven by ongoing low oil/energy prices, a strong U.S. economy, and a competitive Canadian dollar.
Toronto -- Canada's largest office market -- racked up another remarkable year, outperforming expectations once again. The year saw over one million square feet (MSF) of Class A space absorbed in the CBD market, with over 116,000 SF soaked up in the final quarter alone. Toronto has been a global poster child for downtown urban growth for many years and there seems to be no stopping its powerful growth momentum. While many sectors are expanding, demand from technology, big data, e-commerce, software, and information systems companies is particularly strong. In the midst of most significant development booms since the early 1990s, the Downtown availability rate fell to an eight-year low 4.0% in the fourth quarter.
Vancouver's CBD market saw its all class availability rate decline dramatically over 2016, from a peak of 10.0% in Q4 2015 to a current Q4 rate of 5.4%. The main sector behind this growth is technology. While current expansionary momentum in Vancouver's CBD market is modest, if and when the resource sector recovers, this could create an environment where the market is powered by twin engines of growth.
It took a while for Montreal's engines to heat up, and the good news is that expansionary momentum was the story throughout 2016. In fact, 546,000 SF of Class A space was absorbed in downtown Montreal across 2016, with 76,000 SF absorbed in the fourth quarter. The Class A availability rate, which peaked at 11.1% in CBD Montreal in Q1 2015, is now a more moderate 9.6%.
Calgary continues to feel the burden of one of the deepest oil price shocks in history, and the fall-out is far from over. Yet, with recent increases in the price of oil, there is hope that the flood of space that overwhelmed its office markets will begin to recede. However, with 2.4 MSF of new developments set to arrive in the downtown market over 2017 and 2018, and numerous large blocks of space expected to return to market, Class A availability in the downtown is projected to reach 29.1% by late 2018. The CBD Class A availability rate at the end of the fourth quarter was 22.8%. Absorption across all asset classes was negative 23,000 SF over the fourth quarter, a marked improvement over recent quarters in this roller-coaster market.
Edmonton which is facing a serious over supply of space relative to historic average growth, will see vacancy rise to a projected 18.6% by late 2018. At year end, the Class A availability rate in its CBD market stood at 13%. While absorption reached 384,000 SF in Q4 2016, this positive absorption caused by the occupancy of tenants in the newly constructed Edmonton Tower will be offset by negative absorption over the next few quarters as a backwash of space from these tenants re-enters the market.
Ottawa continues to languish from a demand perspective, with the CBD Class A market seeing negative absorption of 57,000 SF in the fourth quarter. The availability rate remains relatively tight at 6.5%. With the expectation that the federal government will be expanding over 2017, the tide could turn on expansionary momentum in the Ottawa market.
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 43,000 employees in more than 60 countries help investors and occupiers optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.