Canada’s Office Real Estate Market: Vacancy Rates on the Rise

Explore the complex landscape of Canada’s office real estate sector, with rising vacancy rates and industry insights from Collier’s and Altus Group.

Canada’s office real estate market is currently facing a complex landscape, with both opportunities and challenges on the horizon. According to Collier’s National Investment Report, released recently, the industry has seen a steady increase in vacancy rates over the past four years. Data from Altus Group revealed that Canada’s office real estate availability rate reached 17.6 per cent in the fourth quarter of 2023.

Canada’s Office Real Estate Sector: Vacancy Rates on the Rise

One significant shift in the workforce dynamic has been the rise of hybrid work environments. Altus Group data from November 2023 showed that the proportion of workers in hybrid setups has tripled since January 2022, climbing from 3.6 per cent to 11.7 per cent. Conversely, entirely remote working arrangements have decreased from 24.3 per cent to 12.6 per cent during the same period.

Institutional investors have been actively divesting from office assets, with private investors increasingly taking their place in the market. The Colliers report highlighted this trend, noting that institutions have been selling downtown assets or adopting a strategy of developing new office properties while selling off older ones.

Moreover, the Canada’s office real estate market is witnessing the conclusion of a significant development cycle. The report from Colliers pointed out that several large projects initiated or planned before the pandemic have been completed over the past three years. This has led to a unique situation where inventory levels are rising alongside vacancy rates.

Canada’s office real estate market is at a crossroads, balancing the evolving demands of a changing workforce with the challenges of a shifting market landscape. As institutional investors step back, private investors are stepping up to reshape the industry. The completion of a major development cycle adds another layer of complexity to the current scenario, requiring stakeholders to adapt and innovate in response to these changing dynamics.