Office space vacancy rates in the suburbs lower than downtown rates across Canada

For the first time in Canadian history, suburban office vacancies have been at a lower level than downtown vacancy rates.

Michael Case, head of CBRE’s Downtown Toronto Office leasing team, says despite downtown office demand in Montreal and Toronto still outpacing nearby suburbs, as they typically do, for the rest of Canada, the suburbs are winning out.

“In fact, in seven of ten of the major markets across Canada we saw the tightening of suburban vacancy,” said Case. “Where we’re really seeing it is in Western Canada, the Calgary’s and the Vancouver’s.”

He said there are a few reasons driving this change including the commute to work.

“A lot of employees right now are saying that, if it’s between the hour commute to downtown or 5 minutes in the suburbs,’ they certainly prefer [the suburbs] right now.”

The tech industry could be another reason. “We’re starting to see a lot of tech users lease space in the suburbs, particularly in Western Canada. But that convenience factor is really driving it, it’s that hybrid work”

Sean Mullin with the Brookfield Institute for Innovation and Entrepreneurship at Toronto Metropolitan University said it’s too early to know how long this trend will continue, but it will unlikely be the death of downtown areas.

“Companies are starting to realize that having a permanently remote workforce is not ideal. So, coming with these hybrid solutions, working some days in the office, working remotely other days, you’re starting to become a much bigger trend and therefore it’s not surprising companies would try to rent office space closer to where people live.”

He adds commuting is not necessarily a great thing for anybody. “It poses a cost on workers; it poses a cost on the infrastructure”

“I do think it’s something that could be a positive evolution for suburban municipalities if they built it into their planning and were able to say ‘Ok, how can we accommodate this type of growth?’ There does seem to be an opportunity that is not just completely transient here. I don’t think this is going to just got away in a year or so,” said Mullin.

Meanwhile, Case said Toronto’s post-pandemic office market is actually an improvement. He said pre-pandemic, the vacancy rate was around 2 per cent, describing that as a landlord’s market.

The sweet spot, he said would be around 8-12 per cent mark with downtown Toronto currently sitting at 11.9 per cent vacancy rate.