Office vacancy rate softens in third quarter

Office vacancy rates in the Greater Toronto Area rose to 7.5 per cent in the third quarter of 2006 from 7.3 per cent in the second quarter, the first softening in the market in three years. The increase comes after a sustained period of strong demand for office space as a healthy GTA economy created solid employment numbers. "What we're seeing over the longer term in the GTA is a more controlled fall in vacancy," said Paul Morse, senior vice-president of Cushman & Wakefield LePage. The short-term jump was primarily due to "weak leasing demand over the summer quarter and a spike in space coming back to market," the real-estate services company said. Morse said he did not expect the trend to continue, and that vacancy rates would continue to tighten in the future. Higher vacancies would not bode well for Toronto, since three major office projects — each more than a million square feet — are about to be built downtown. "Corporate profitability is high and we expect strong leasing activity and positive absorption in the quarters to come," Morse said.