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Tenants snap up office space in first quarter

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 percent, compared to 10.1 percent last year. Tenants leased 704,431 square feet of space, compared to 441,310 last year.

The industrial vacancy rate fell to 7.3 percent from 8 percent. 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.”

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 O’Bryan. “They’re feeling comfortable about acquiring additional assets because the economic fundamentals in Canada are strong and interest rates are compelling.”

From the report:

Vancouver: “The metro office vacancy rate decreased from 10 percent in the first quarter of 2010 to 9.4 percent 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 percent compared to 8.0 percent.

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

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

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

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

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

Toronto: Overall office vacancy rate was 8.7 percent, down nearly a full point from the previous year’s rate of 9.6 percent. The downtown vacancy rate fell 100 basis points to 6.3 percent, 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 percent from 7.7 percent during the same period in 2010.

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

Montreal: Office vacancy rate declined from 10.6 percent in the first quarter of 2010 to 9.6 percent in 2011. Montreal's industrial availability rate on the other hand rose nearly a full point to 11.2 percent for the first quarter of 2011, compared to 10.3 percent 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 percent in the first quarter, down from 9.4 percent in the same period of 2010. In the Halifax industrial sector, the overall availability rate was relatively stable at 4.3 percent in the first quarter of 2011, compared to 4.1 percent the year prior.”

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