CBRE dec 2024 factsExtracts from the CBRE office report
-Annual net absorption totalled to 2.6 million sq. ft. across Canada in 2024. This is the first year of positive net absorption for the office market since 2019. Calgary and Edmonton were the only cities to post positive absorption in each quarter of 2024. -
National office vacancy held at 18.7% to end 2024. While still 20 basis points (bps) higher than a year prior, vacancy has found some stable footing having remained in a 40 bps range over the last seven quarters and is expected to peak in early 2025.
Diverging dynamics between downtown and suburban markets and office product class is expected to persist given recent occupier sentiment towards upgrading to higher-quality space. In particular, the delta between Trophy and B/C buildings remains at an all-time high downtown.
Sublet space has continued to trend downward, now for a seventh consecutive quarter. Six of 10 markets saw sublet space decrease this quarter, and on a square footage basis was led by Toronto with a reduction in excess of 200,000 sq. ft.
Active office construction has fallen to 3.4 million sq. ft., a 20-year low. Limited construction starts will keep the pipeline muted following the final wave of delivers in 2025
Annual net absorption totalled to 2.6 million sq. ft. across Canada in 2024. This is the first year of positive net absorption for the office market since 2019.
While the last two quarters of 2024 were neutral to slightly negative in terms of net absorption, this slowed activity was unable to undo significant momentum from the first half of the year.
Net absorption was effectively broad-based in 2024 with eight reported markets posting positive net absorption for the year.
The Alberta markets of Calgary and Edmonton continue to be a bright spot for activity and were the only cities to post positive absorption in each quarter of 2024.
Relative to Q3, Vancouver and Montreal experienced upticks in activity in the fourth quarter, Ottawa meanwhile continued to slow with shadow vacancies emerging. Similar stories are playing out in Waterloo Region and Toronto, each seeing significant future availabilities hitting the market in the final months of the year.
While Q4 saw vacancy rise across all segments downtown, Trophy assets, the top-tier among Class A, continues to outperform all the rest. Vacancy levels within this in-demand product type have hovered between 10.0% - 11.0% over the course of 2024.
The delta between vacancy in Trophy and B/C buildings remains at an all-time high, with vacancy in Class B/C product nearly two and a half times higher than Trophy.
Tenants have become more refined in what’s driving their real estate decisions with 59% of respondents to CBRE’s 2024 Americas Occupier Sentiment Survey indicating they were considering or executing relocating into higher-quality space. Occupiers already in Class A are now also upgrading to AA or AAA buildings or improved, more central locations.
As such, prime spaces are expected to become more scarce in the year ahead due to the slowdown in new construction. As vacancy in trophy assets tightens, demand will likely overflow to the next quality tier of buildings, especially those that are well-located and with in-demand amenities.