Property’s Total Value Expected To Reach $386 Million
Equiton said it bought a development site in Toronto for its third condominium development project in the city.
The Toronto-based company that has just over $1 billion in assets said it bought the site atĀ 1099 Broadview AvenueĀ for its newest project, to be called TEN99 Broadview. It would be Equiton’s largest condo offering to date.
“The property’s desirable, transit-oriented location is a stone’s throw away from some of Toronto’s best green spaces,” Jason Roque, founder and CEO of Equiton, said in a statement. “Coupled with the local amenities, it’s ideal urban living.”
Established in 2015, Equiton has more than 12,000 investors, and nearly 200 employees. The firm manages 39 properties that contain 2,752 units in 17 regions nationwide.
The company’s latest project expects to have occupants move in by late 2028. Upon completion, the property’s total value is expected to reach an estimated $386 million, providing a targeted annual return of 20%, the development team said.
Last quarter, Equiton Developments launched registrations for KĆ¼L Condominium atĀ 875 The Queensway, west of downtown Toronto. In addition to the three projects in Toronto, the company has existing developments in Ottawa and Guelph.
Source CoStar. Click here to read a full story.
At TorontoCommercialProperties.ca, we’re dedicated to keeping you informed about crucial developments that could affect your commercial real estate investments. One such development is the recent increase in Canada’s capital gains tax and its potential impact on the real estate market.
The Canadian government’s decision to raise the capital gains tax has stirred discussions and raised concerns among investors. This hike, affecting individuals with taxable capital gains, may influence investment decisions in the commercial real estate sector.
Here’s a closer look at how this tax hike could affect commercial real estate investment:
- Shift in Investment Strategy: Investors may reconsider their investment strategies in response to the higher capital gains tax. With increased taxes on capital gains, investors might seek alternative investment options that offer more favorable tax treatment. This shift could lead to a redistribution of capital away from real estate and into other asset classes.
- Impact on Market Dynamics: The hike in capital gains tax could potentially alter market dynamics in the commercial real estate sector. Some investors may decide to hold onto their properties longer to defer the realization of capital gains and mitigate the impact of higher taxes. This behavior could reduce the supply of available properties in the market, leading to increased competition among buyers.
- Effect on Pricing: The increase in capital gains tax may also have implications for property pricing. Sellers may factor in the higher tax burden when pricing their properties, potentially leading to adjustments in property valuations. Moreover, buyers may negotiate lower purchase prices to compensate for the anticipated increase in tax liabilities.
- Regional Variances: It’s essential to consider regional variances in the impact of the capital gains tax hike. In markets like Toronto, where commercial real estate values have traditionally been strong, the effect may be more pronounced compared to other regions. Investors should closely monitor market trends and assess the specific implications for their investments in different geographic areas.
- Long-Term Outlook: Despite the short-term uncertainties resulting from the capital gains tax hike, the long-term fundamentals of the commercial real estate market remain strong. Factors such as population growth, urbanization trends, and economic development continue to drive demand for commercial properties. Investors with a long-term perspective may view any market fluctuations as temporary and maintain confidence in the resilience of the real estate sector.
In conclusion, while the increase in Canada’s capital gains tax may introduce new considerations for commercial real estate investors, it’s essential to approach investment decisions with a comprehensive understanding of the potential implications.
At TorontocommercialProperties.ca, we’re committed to providing you with insights and guidance to navigate the evolving landscape of commercial real estate investment. Stay informed, stay proactive, and position yourself for success in the dynamic real estate market.
Whether you’re seeking investment opportunities, looking for development land, or market analysis, our team is here to assist you every step of the way.
Don’t hesitate to reach out to us for personalized advice and support in navigating the evolving landscape of the commercial real estate market. Contact us today to discuss your commercial property needs and discover how we can help you.
Key highlights
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Altus Groupās second annual Global Construction Costs webinar is now available to watch
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Developers are getting a bit of a reprieve from the painful escalation in construction costs seen in recent years; however, that relief is not evident everywhere
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During the webinar, experts from Altus Groupās development advisory team discuss how micro-economic factors, as well as inflation, interest rates and trends around AI and sustainable development practices are influencing the outlook for cost escalation within different regions
Altus Groupās second annual Global Construction Costs webinar delves into factors influencing regional cost escalation
Developers are getting a bit of a reprieve from the painful escalation in construction costs seen in recent years. Stabilizing construction costs across many geographies was one of the common themes discussed in Altus Groupās recentĀ Global Construction CostsĀ webinar.
However, that relief is not evident everywhere, and the rate of cost increases varies widely depending on the local market, property sector, and scale of a project. In addition, the break from soaring costs may be short-lived with significant cost pressures still at play. Experts from Altus Groupās Development Advisory team discuss how micro-economic factors, as well as inflation, interest rates, and trends around AI and sustainable development practices are influencing the outlook for cost escalation within different regions.
āLabor shortages are an issue across the board, and that is going to become more of a challenge as we go into manufacturing and other types of complicated projects,ā says Faris Rehman, Director in our Development Advisory team in Houston. Although construction pipelines for some sectors are slowing, increased federal government spending on infrastructure is expected to put more demand on materials and potentially transfer labor from residential projects to those more specialized projects, he adds.
Global trends to watch
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The combined effect of cost escalation and stagnating revenues is expected to result in more distressed developments and assets coming to the market.
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AI has promise in some areas of the construction industry, particularly in areas where there is an ability to leverage the power of its predictive forecasting. Potentially, AI could be useful in project planning and feasibility analysis.
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Regulations, development fees, delays, and taxes are putting more cost pressure on developers, which has a direct impact on the feasibility of projects.
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On-going conflicts in the Middle East and Europe remain a major risk factor and potential wild card for the development industry, along with the upcoming US presidential election
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Sustainable building practices remain a key topic of conversation in the building industry, with more attention focusing on how to reduce embodied carbon in buildings and building materials.
United States
Construction costs in the US have increased between 25% and 40% since 2020, and itās unlikely that costs will return to pre-pandemic levels. High inflation appears to be under control, and cost escalation has pulled back to more historical levels of 3.5% to 4%.
āWeāve seen stabilization in the supply chain, which is a big positive improvement. However, we still do have issues across for other sub-trades, in particular electrical and mechanical wherein the lag time still hasn’t improved, and that is going to be the trend going forward as well,ā says Rehman. Interest rates have dampened the demand side of projects in the pipeline. Developers also are experiencing higher capital costs and tighter liquidity due to regional banks in the US that are under stress.
Outlook: Construction costs overall are more stable, but still rising. Cost increases have dropped back to historic levels in the range of 2 to 6% annually. However, increases will vary depending on the region with lesser escalation in the Midwest, like Chicago and higher levels in hot spots such as Phoenix. Project type also will influence cost increases related to both materials and labor, with higher escalation expected in the heavy industrial and manufacturing sector and gradual return to traditional ranges in the multifamily segment
Canada
Canadaās high population growth is straining its housing capacity and driving up costs. Last year, Canadaās population grew by over 3%, which makes it one of the fastest-growing countries in the world. The Canadian Mortgage and Housing Corporation (CMHC) estimates that the country needs more than 5 million new homes by 2030, which would require tripling its current building rate. āOur housing starts are falling rather than going up, so the problem is severe and getting much worse,ā says David Schoonjans, Senior Director in our Development Advisory team in Toronto.
Developers have the desire and expertise to build but are dealing with a glacial pace of approvals and changing regulatory environment around green standards and carbon pricing. Easing some of the bureaucratic hurdles that exist will take considerable time. Studies that Altus has done show that development approval durations have extended in recent years, across most markets. In its 2020 Doing Business report, the World Bank also ranked Canada as the second worst in the OECD for the time component of its āDealing with construction permitsā attribute. āSo, we have a lot of work to do and itās not going to change overnight,ā says Schoonjans.
When Altus Group launched itsĀ 2024 Canadian Cost GuideĀ in January 2024, it indicated that inflationary pressures, and construction costs have stabilized in Canada. Although that remains generally true, there are some nuances in construction trends. For example, interest rate increases have created bigger challenges to housing construction in Toronto, which was already a very high-cost market. High housing prices have shifted migration and construction activity to more affordable cities such as Calgary.
Mixed outlook: Toronto and Calgary bookend the two extremes in Canada. Looking specifically at high-rise residential, costs in Toronto have been coming down slightly. By the end of 2024, costs may decrease by 2 to 3% from what remains a very high basis. āWe do believe that is going to be short-lived because of the pressure from housing shortages,ā says Schoonjans. āItās entirely possible that we’ll see 10% cost escalation by 2026.ā Calgary is likely to experience cost increases this year due to the in-migration of people moving to the city.
Europe and Australia
Across Europe, prices appear to be stabilizing on materials, while labour issues are continuing to rise. Western states tend to have higher demand and lower labor availability, which is driving bigger increases. Those states that are struggling with high unemployment and low growth, such as Spain and Greece, are experiencing lower levels of cost increases.
In Australia, construction costs are still ticking higher, due primarily to labor costs. According to Altus Groupās latestĀ Australian Construction Materials Price Outlook, Australia’s residential construction is failing to keep up with population growth. It is estimated that an additional 450,000 workers are needed to build houses to meet demand in Australia. āThe driver is around migration, which is a bit of a double-edged sword,ā says Niall McSweeney, President of the Development Advisory team in Sydney. There is a need to bring more people in to fill jobs, while more people also fuels greater demand for affordable housing, he adds.
Outlook: Overheated markets, such as southeast Queensland, and poor participation by delivery partners in the residential sector in New South Wales are causing extremely high levels of price increases. In addition, natural disasters, including flooding from cyclones, is having an impact on markets in the far north of Australia. Flooding will spur more rebuilding activity in areas such as New South Wales, which will further impact availability of materials and labor. Generally, construction costs are likely to rise between 4 and 8%, with some areas and sectors that rise far beyond that 8%.
Conclusion
Globally, a common theme is that the rate of cost escalation is very nuanced due to local and regional factors. As such, it is prudent to talk with a cost consultant about specific locations and projects and not rely on general rate information and forecasts when analyzing construction costs and project feasibility.
Source Altus Group. Click here to read a full story.
Key highlights
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Property tax is the largest, single expense for most property owners, representing nearly 25% of net operating income (NOI) on average, and is often overlooked as an important āleverā that can be pulled to impact commercial real estate valuationsāÆĀ Ā
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Property owners who are not proactively managing their real estate taxes, particularly in the current market climate, may be contributing to a decline in their property valuesĀ
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When real estate assessors value a property, they use mass appraisal techniques whereas property tax experts dig deeper to get to the real value; that includes doing research, analyzing data, and conducting comparisons with similar propertiesāÆĀ
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Managing your property tax liability must begin when the notice of assessed value is received.āÆ When the tax bill arrives, it is too late
Property tax as a valuation lever
The value of a commercial real estate property is one of the most important metrics — if not the most important — that any manager, finance team, or owner must continually track. A higher property value can mean increased occupancy, higher rental income, and a more attractive selling price if the building is sold.
While valuations are often dictated by market forces outside a property ownerās control, there are several āleversā an owner can pull to impact valuation. Things like building maintenance costs, ESG upgrades, insurance and tenant-friendly amenities are all examples of areas where smart management can impact CRE values. Property tax is one of the most significant costs that CRE firms face, however it is oftentimes overlooked as one that can be managed.
Your property tax management strategy can have a big impact
Property taxes make up a substantial portion of a commercial buildingās operating expenses, and therefore, have a major impact on its profitability.
In fact, property tax is the largest, single expense for most property owners. According to the NCREIF property index, in 2023 property tax represented nearly 25% of net operating income (NOI) on average across all commercial real estate sectors in the US.
Figure 1: NCREIF Property Index FY2023 ā The significance of property tax expenses
If an owner or investor can proactively reduce their tax bills, they can make a big impact on NOI, and potentially on the value of their property.
A simple calculation illustrates how reducing property tax impacts NOI. For example, assume an office building is valued at $5 million, using a 5% cap rate. If property taxes on that building are $100,000 per year, a 10% reduction in property taxes can lead to a 4% increase in NOI in a gross lease environment. In a net lease environment, the property tax reduction lowers tenantsā gross occupancy costs. This can assist with tenant retention or provide room to increase base rents. In each case, there is a substantial positive impact on the value of the property.
However, if a building owner or investor does not actively manage property tax expenses, the increasing costs will negatively impact NOI and/or gross occupancy costs. There will be less capital available to improve the property, tenants will be less motivated to stay, and higher gross occupancy costs will mean you can charge less rent. All of these will have a negative impact on the buildingās valuation.
Source Altus Group. Click here to read a full story.
Key highlights
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In the first quarter of 2024, the national office availability rate across Canada stabilized at 17.5%
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The hybrid work model has cemented itself as a preferred work arrangement, as the share of workers with hybrid arrangements has more than tripled since the start of the pandemic
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The Quebec market reported the lowest office availability rate at 11.9%, followed by Vancouver and Ottawa, respectively
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The Calgary market continued to record the highest availability at 23.2%
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As of the first quarter of 2024, 5 office buildings were completed, with Toronto leading the country in the total completed office buildings
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Nationally, 50 office projects were under construction in Q1 2024, totalling 8.1 million square feet, with 52% pre-leased
Office availability rates remained flat across Canada
In the first quarter of 2024, the national office availability rate across Canada stabilized at 17.5% for the fourth consecutive quarter (Figure 1), as sublet space steadily decreased. Furthermore,Ā according to Statistics Canada, the hybrid work model has cemented itself as a preferred work arrangement, as the share of workers with hybrid arrangements has more than tripled since the start of the pandemic.
Office leasing transactions continued to be predominately skewed toward Class-A buildings compared to Class-B and C buildings as businesses prioritized high-quality, amenitized spaces located in centralized areas. This phenomenon, which has been dubbed the āflight to qualityā, has been a component in the discussion of adaptive reuse, specificallyĀ office-to-residential conversion.
According toĀ Statistics Canadaās Labour Force Survey (LFS),Ā as of March 2024, employment remained virtually unchanged (-2,200, -0.0%), as population growth continued to outpace employment growth. In addition, the unemployment rate increased slightly by 0.3 percentage points to 6.1%, due to softening in the accommodation, food services and retail trade. Gains in employment were noted primarily in health care and social assistance. Meanwhile, losses in employment were led by accommodation and food services.
Figure 1 – Office availability (Q1 2023 vs. Q4 2023 vs. Q1 2024)
The Quebec market reported the lowest office availability rate at 11.9%, followed by Vancouver and Ottawa, respectively (Figure 1). The Calgary market continued to record the highest availability at 23.2%; however, at the same time, Calgary has continued to observe declines in its availability rate. This downward trend is primarily due to the cityās Downtown Calgary Development Incentive Program, which has assisted in gradually removing underutilized and vacant spaces from the marketās inventory and increasing leasing activity. Other major markets across Canada have begun to explore the creation of incentive programs to subsidize private office conversions, but current economic conditions have presented numerous challenges to its design.
Figure 2: Office completions and availability (Q1 2024)
As of the first quarter of 2024, 5 office buildings were completed. Toronto leads the country in the total completed office buildings, with 2 office buildings totalling 1.4 million square feet, including the completion of the Cadillac Fairviewās office tower in downtown Toronto (Figure 2).
Figure 3: Office under construction and availability (Q1 2024)
With office vacancies continuing on an upward trend, the demand for office space has diminished and no new significant large office towers have been announced. Nationally, 50 office projects were under construction in the first quarter of 2024, totalling 8.1 million square feet, with 52% pre-leased (Figure 3). Vancouver and Toronto led the country with the highest number of office projects under construction, 23 and 17 projects, totalling 3.1 and 4.1 million square feet, respectively.
Conclusion
As the hybrid work arrangement has observed an upward momentum since 2022, landlords and businesses have responded with the optimization of office space and human resources to reduce expenses. Furthermore, the economic slowdown and rising uncertainty have led to investors and developers adopting a pens-down approach to new office project developments. Demand for office space in Canada is expected to remain strong for newer and well-located office buildings in 2024, while landlords work to secure new and existing tenants.
Ask the expert: Victor Cotic, Executive Vice President, Sales Representative | National Investment Services, Colliers Toronto Brokerage
What is your assessment of the current industrial market cycle in the Greater Toronto Area (GTA)?Ā
Itās no surprise that rising interest rates have had a significant and direct impact on commercial real estate. Even the otherwise resilient GTA industrial market has felt the pressure of the economic uncertainty caused by inflation and interest rates.
The market consensus is that interest rates have stabilized, which should mean the bottom of the current market cycle. On the other hand, rental rate projections, which are the other primary driver of industrial valuations, are slowing down. This past quarter, we saw a shift from annual growth rates of +/- 20% to those aligned with inflation. The slowing in rental rate growth is working its way through valuations. This may put the GTA industrial market closer to the middle of the market cycle.
Regardless of the cycle, industrial investment has historically been undersupplied, with more buyers than sellers, and this remains the case today. Real estate investors are generally bullish long-term on the GTAās industrial investment market and want to add to their portfolio.
What have been the main challenges to completing transactions and how can these be overcome?
Two common challenges are shifting market conditions, particularly interest rates, and concerns that arise in due diligence. The best way to manage both potential challenges is to overcome hesitation with a thoughtful and expert approach to the transaction, accelerating its timeline. This can be done by completing proper pre-marketing due diligence. Before going to market, expert advisors with sector-specific knowledge can quickly address these challenges by reviewing leases, environmental and building condition reports, and operating statements before soliciting buyers. This pre-marketing due diligence allows for quicker transactions, reduces the risk of withdrawal or price reductions, and minimizes exposure to potential shifts in market conditions.
What is the investor profile in the GTAās industrial market? And who is divesting?Ā
Last year, we saw institutional investors divest some of their industrial properties as the rapid change in interest rates caused allocation and redemption issues and prompted sales. As a result of more expensive financing, particularly construction financing, institutional investors sold existing buildings to re-capitalize and fund new developments in their pipelines.
With institutional investors less active, private investors became more significant players on the buy side. In the last five years, private investorsā representation has grown from roughly 10% of the GTA industrial market to over 30%, remaining relatively consistent amidst the challenging market conditions of the past 24 months.
Over the past year, foreign institutional investors have also entered the GTA industrial market. GIC Private Limited, a Singaporean sovereign wealth fund; Brookfield Properties; and TPG Inc., an American private equity firm, have all recently invested in GTAās industrial sector.
In the current interest rate environment, value-added real estate investments are taking the spotlight, with investors seeking higher risk-adjusted returns. However, if interest rates were to drop, it would likely prompt an increase in institutional capital to refocus on core Class A opportunities at returns aligned to previous years. Domestic institutional investors are well-capitalized, and I expect an increase in their acquisition activity in the short term.
Is it easier now to underwrite an investment with the recent stability in interest rates?
Absolutely! However, āstabilityā is relative as bond rates continue to fluctuate, albeit significantly less than in 2022 and 2023. In the past, we saw market rental rates achieve an upward trajectory of 20% year-over-year growth. If market rental rates continue to stabilize, another key variable in underwriting real estate investments will also be simplified.
What key trends do you foresee in the GTAās industrial investment market for the balance of the year?
GTA industrial availability rates have been increasing rapidly, from a low of 0.6% in Q2 2022 to 3.1% currently. The rise in availability has released much of the upward pressure on market rental rates, and we have seen rental growth come off from +/- 20% down to +/- 3%. The market remains extremely tight at 3.1% availability, and we expect market rents to remain stable in the GTA.
We should expect the year’s balance to reflect 2023 but with potentially less transaction volume in the industrial investment market. Those looking to divest did so in 2023 and have primarily re-allocated that capital, resulting in less sales activity in 2024.
Why should investors work with you for their commercial real estate needs?
Working with an experienced advisor is critical to navigating challenging market conditions. With over 20 years of experience in investment sales, I provide expertise and best practices across various transaction types and markets. Our team prioritizes client goals, pre-marketing due diligence, and eliminating risk for an efficient and effective transaction. Additionally, Colliers offers a suite of tools and services, including Debt Advisory, for those looking for a full-service approach to their real estate needs.
Source Renx.ca. Click here to read a full story.
Major real estate data surveys are reporting mixed signals for the Canadian office sector this quarter, with positive net absorption but a higher vacancy rate (18.4 per cent) nationwide led by upticks in both Toronto and Vancouver.
Another significant ongoing trend is the reduction in office space under construction, which dropped to 9.1 million square feet across the country – its lowest level since 2011 according toĀ CBREāsĀ Canada Office Figures Q1 2024Ā report. No new office buildings broke ground in the quarter.
āThe Canadian office market reported 439,000 sq. ft. positive net absorption to start off the year,ā the reportās executive summary states.
āThis is the first quarter of positive net absorption since Q3 2022 and was bolstered by pre-leased new supply in Vancouver, offsetting further softness in Toronto.ā
The long, bumpy and geographically fragmented recovery from the COVID-19 pandemic and the ongoing hybrid home/office working models are reflected in the data.
Vacancy up in Vancouver, but market remains strong
While Vancouver remains one of the strongest office markets in North America with a vacancy rate of 9.5 per cent, it did increase slightly in Q1.
And while some secondary markets are showing signs of continued improvement, Toronto also experienced a rise in overall vacancy to 19.2 per cent, including 18 per cent in the downtown.
Both Vancouver and Toronto were impacted by space dumped by WeWork as part of its restructuring process which returned to the market, CBRE notes.
There is almost five million square feet of additional space under construction in the Greater Toronto Area (more than half the nationwide total), with about 54 per cent of it preleased.
āWhile vacancy has continued to increase nationally, we are starting to see some green shoots in Canadaās downtown office markets,ā CBRE Canada chairman Paul Morassutti noted in the report.
āIn each of the last three quarters, five of the 10 cities tracked recorded declining downtown vacancy on a quarterly basis. It doesnāt mean things have fully stabilized, but it offers some much-needed optimism for the heavily scrutinized office market.ā
Helping mitigate vacancy stats are new office-to-residential conversion projects, which removed an additional 870,000 square feet from inventory as 13 projects in eight markets moved forward. The average vintage of these buildings from the C- and B-class inventories is 1985.
Following are snapshots of 11 Canadian markets, with data provided from the CBRE report and augmented from other reports where noted.
Toronto
Downtown vacancy climbed to 18 per cent, while suburban vacancy hit 20 per cent, mainly due to new direct space going onto the market.
Absorption for the quarter was -696,465 square feet in a total office inventory of 171.7 million square feet citywide. Sublet space comprises about 22 per cent of the total.
While the downtown class-A vacancy rate was 15.5 per cent, a much higher suburban class-A vacancy (23.6 per cent) meant that overall, class-A vacancy was almost the same as vacancy for all classes, at 18.8 per cent.
Avison Young also released data which shows GO Transit trips in Toronto settled at about 60 per cent of pre-pandemic norms in 2023.
The data shows an average of about three million trips per month on the commuter rail service, though there was a rise through the fall to just under four million trips in November. That compares to about five million monthly trips in 2019.
āConsidering GO rail as one of the primary public transit options for office workers commuting downtown, the increase in ridership suggests a steady return of workers to an in-office environment,ā the post states.
āHowever, since vacancy rates are typically a lagging indicator, this ‘return’ has yet to translate into the overall vacancy rate.
āWe anticipate that higher-end or trophy properties, which have generally maintained lower vacancy rates, will experience a positive impact first before demand trickles down to the class-A and eventually class-B office market.ā
Vancouver
The addition of 1.15 million square feet of new supply during the quarter bolstered the cityās overall inventory to 53 million square feet. Because most was pre-leased, it also led to 1.04 million square feet of absorption.
However, the cityās downtown vacancy rose to 10.9 per cent and suburban vacancy was at 8.7 per cent – for a citywide total of 9.5 per cent.
Sublet space dropped to 24.4 per cent of that, with about five million square feet of space available in total (2.4 million square feet of direct versus 667,000 square feet of sublet).
1.96 million square feet of new space remains under construction, all outside the downtown.
Montreal
Downtown vacancy declined for the first time in six quarters, with class-A activity trimming it to 17.7 per cent. Suburban vacancy was up slightly to 18.7 per cent, and citywide the rate was up slightly to 18.1 per cent.
Market bifurcation is continuing, with the majority of activity resulting from tenants ātargeting best-in-class buildings with great amenities,ā the report states. With over two million square feet under construction, this trend is unlikely to slow.
Overall absorption was -192,000 square feet (total inventory 78 million square feet), driven mainly by a drop of over 300,000 square feet in the suburban markets.
Calgary
The regionās total inventory of 68.6 million square feet experienced a slight increase to 28 per cent vacancy, with 30.3 per cent in the downtown and 24.4 per cent in the suburbs.
Net absorption and leasing activity were almost flat, and a 127,488-square-foot suburban medical office building was the lone Q1 delivery.
Edmonton
The city recorded its third straight quarter of declining vacancy, with overall vacancy down to 21.1 per cent (22.3 per cent downtown, 19 per cent in the suburbs).
Much of the activity, which resulted in just over 40,000 square feet of absorption, occurred with large-scale users in the downtown.
This has led to a slight increase in average class-A net rents, which were $19.53.
Regina
The city’s availability rate continued its recent decline, dipping to 15.5 per cent, according to anĀ Avison Young Q1 report. That’s down significantly from 17.75 per cent in Q1 2023, and reflects a market with no new recent space deliveries – and none on the horizon.
Vacancy for class-A space is at 8.8 per cent, and asking rents for these properties in the city range from $22 to $34, the report states.
Winnipeg
Completion of the downtown Wawanesa Tower delivered 380,000 square feet of fully pre-leased space to the market. As Wawanesa consolidated its employees from across the city, a move from 191 Broadway freed up 68,000 square feet in that property.
All the activity raised Winnipegās downtown vacancy to 18.6 per cent, while suburban fell to 10.2 per cent, for a citywide average of 16.2 per cent. The region has an inventory of 14.4 million square feet.
London
Demolition of the former LondonĀ Free PressĀ building removed 145,000 square feet of office space in the downtown area, leading to a decline of citywide vacancy to 23.7 per cent and a revised office inventory of 6.3 million square feet.
Waterloo Region
The regionās comparatively healthy office market saw vacancy rise slightly to 13.9 per cent, but there is no new space in the construction pipeline. The regionās inventory stands at 16.1 million square feet of space, with most of it (11.1 million square feet) considered suburban space.
Average net rents continued a year-long decline, dipping to $21.66 in Q1.
Vacancy is heavily focused on the downtown, which is at 22.5 per cent compared to 10 per cent in the suburbs.
Ottawa
Ottawaās vacancy rate dropped 30 basis points to 13 per cent, but its inventory also continued to fall – to 40.8 million square feet – thanks to the removal of aging buildings for office-to-residential conversions.
The latest is 200 Elgin St., which will be the fifth downtown conversion in recent years.
The market has seen only one quarter with rising office inventory since late 2021.
Absorption of 183,172 square feet in the suburbs offset -92,402 square feet in the downtown.
In its own report, Colliers reports availability of 14 per cent across the city and vacancy of 12 per cent. It notes almost 440,000 square feet of net absorption during the past six months.
One less encouraging note in the Colliers report is that the cityās return-to-office stats lag most other major cities, at just 54 per cent of pre-COVID levels (Toronto is at 78 per cent, Montreal 67 per cent and Vancouver 72 per cent).
Halifax
Conversions are also gaining traction in the Halifax Regional Municipality, where the overall office vacancy rate held steady at 14.1 per cent, but inventory declined to 12.9 million square feet.
Interestingly, this market has also registered year-over-year growth in rents for the past five quarters, hitting $18.27 for class-A properties in Q1 2024.
There is 1.7 million square feet of space available for lease, but only 5.7 per cent of that is sublet space. It is also evenly distributed among the downtown and suburban markets.
Source Renx.ca. Click here to read a full story.
