Office vacancy rate stalls

Office vacancy rate stalls Demand for GTA commercial space cools — for now Calgary has lowest rate in nation at measly 1.5% Tony Wong Toronto Star Tuesday June 20, 2006 The Greater Toronto Area office vacancy rate flattened in the second quarter of 2006 as demand for commercial space cooled down, according to a report by property firm CB Richard Ellis. After two years of solid gains, the GTA vacancy rate hit 9.1 per cent in the second quarter of the year, down only by one-tenth of a percentage point. "The market looks like it's taking a bit of breather," said Ray Wong, director of national research for CB Richard Ellis in an interview. "It's been running pretty hard up till now." Since vacancy rates were at a high of 15.7 per cent in the third quarter of 2003, they have been aggressively ratcheting down for the last nine quarters as the economy improved, said Wong. The minute decrease this quarter represents an absorption of only 164,000 square feet that was leased during the quarter, compared to 1.2 million square feet in the prior quarter and almost 2 million square feet leased in the fourth quarter of 2005. It's a trend that should remain intact for the remainder of 2006 as the commercial realtor sees vacancy rates remaining relatively flat. "We still anticipate vacancy rates to go down moving forward, and the fundamentals are still very solid," said Wong. Vacancy rates have been a key indicator of the confidence level that companies hold in the economy. Canadian job numbers have been solid — earlier this month a labour market report showed that 96,700 net new jobs were added in May, five times expectations. New employees typically mean more demand for office space as companies expand. Meanwhile, vacancy rates in the key downtown core for top class A buildings mirrored the overall GTA figures and were down to 7.1 per cent from 7.2 per cent. Anything under 10 per cent is considered more of a market tilted toward landlords than tenants. Toronto followed the national trend which saw vacancy rates fall modestly from 8.6 per cent in the first quarter to 8.4 per cent in the second quarter. "One factor that contributed to the decline in demand in some markets is that many tenants in the larger markets have already committed for office space over the past two years," said Blake Hutcheson, president of CB Richard Ellis. "This was done to take advantage of comparatively low rents so those companies are not seeking space." However, Hucheson said, "As the economy continues to grow this will change." At an extremely tight 1.5 per cent, Calgary continues to have the nation's lowest vacancy rate. Calgary's downtown area, with a class A vacancy rate of 0.2 per cent, is "the lowest in the world, even lower than Tokyo which traditionally has the lowest vacancy rate of any major city," said the report. Long term, CB Richard Ellis sees vacancy rates rising in Toronto in 2009 and 2010, as new office space comes on the market.