Canadian office market update – Q1 2023

In the first quarter of 2023, the national office availability rate increased slightly from the previous quarter to 17.3% (Figure 1), with sublet space now representing 18.8% of the total available office space. Companies are trying to balance work from home and return to office as they determine their office space requirements moving forward. At the same time, companies appear to still be struggling with retention and a low unemployment rate. Class AAA and A office assets, particularly recently completed buildings, have remained popular and captured more leasing activity despite post-pandemic market challenges. At the same time, employers and landlords continue to leverage quality office amenities to incentivize employees to return to the office.

The Canadian labour market remained unchanged for the most part in January and February, adding a combined 177,000 jobs, a 1 per cent increase according to Statistics Canada. Gains in employment were noted in public administration and in healthcare. While these industries saw gains, losses in employment were noted in business, building and other support service sectors.

Figure 1 - Office Availability Rate (Q1 2022 vs. Q2 2023)

Four office buildings were completed in Canada in the first quarter of 2023, totalling slightly less than 0.5 million square feet with about 64% of space available for lease (Figure 2). These building completions were located in Winnipeg, Montreal and Halifax. Montreal saw the completion of the 147,000 square foot Gare Viger in Old Montreal with 70% vacant.

Figure 2 - Office Completions and Availability Q1 2023

Nationally, there were 70 office projects underway as of the first quarter of 2023. Vancouver and Toronto alone had 29 and 27 projects underway, respectively, totaling 11.3 million square feet under construction with about 60% already pre-leased.

Figure 3 - Office Under Construction and Availability Q1 2023

With more companies adopting a hybrid work model which requires employees to come back to the office 2 to 4 days a week, we anticipate return to the office will continue to grow, especially with a few firms now mandating a return. It is also likely that firms will continue to struggle with how much space they require to accommodate the hybrid model and the amenities to entice employees to return.

View the Canadian office market update - Q4 2022