Canada’s national downtown office vacancy rate reached a new high of 19.4 per cent in the fourth quarter of 2023, according to a new report, with demand for office space in Toronto particularly slow.

The findings from Coldwell Banker Richard Ellis (CBRE) Canada showed downtown office vacancy in Toronto reached 17.4 per cent in the quarter, up from 15.8 per cent a quarter previous.

The report pointed to new office construction for the increased vacancies.

“The office market continues to face challenges, but Toronto’s are particularly acute right now,” CBRE Canada Chairman Paul Morassutti wrote in a news release.

“Based on global trends, office utilization and demand are picking up. That is helping improve office fundamentals in most Canadian cities. Toronto will also benefit from the overall trends once new construction comes to an end since it is new supply that’s had the biggest impact on the city’s vacancy.”

IMPROVEMENTS IN OTHER CITIES

Outside of Toronto, Canada’s office vacancy rate improved, the report said, as more companies require in-office work.

Major cities such as Vancouver, Calgary, Edmonton, Ottawa, and Halifax all saw improving vacancy rates.

OFFICE CONVERSIONS HELPING

CBRE said office-to-residential conversion programs in Calgary and Ottawa have helped improve office vacancy rates.

Calgary’s vacancy rate fell to 30.2 per cent for the quarter, while Ottawa’s fell to 14.2 per cent.

Overall, more than 232,000 square metres of office space was converted to residential property in 2023, amounting to 0.5 per cent of Canada’s total office space. 

Residential conversions are touted as a possible solution to Canada’s growing vacancy rates and its housing crunch.