Office sublet market growing: survey
By VIRGINIA GALT, Globe and Mail Update
http://ctv2.theglobeandmail.com/servlet/...usiness/Business/businessBN/ctv-business
As companies downsize and need less room, many are trying to rent out their unused space, with sublets now accounting for 19.5 per cent of vacancies in the Canadian office rental market, according to a report Monday by commercial real estate firm Colliers International.
Overall, the average national vacancy rate for downtown and suburban office space rose to 5.9 per cent in the first quarter of 2009, up from 5.1 per cent in the last quarter of 2008, the firm said. As a result of softening demand, downtown office rents have fallen by an average of 5.8 per cent to $47.50 a square foot.
“Of note is the growing trend by companies to shed leased office space that was earmarked for future growth requirements as they reorganize business operations to endure the current economic climate,” Colliers said.
The sublease trend is most pronounced in Calgary, which has been hit by the sharp decline in oil prices, and Ottawa, where the high-tech sector has cut staff, Colliers said.
Calgary still has one of the lowest office vacancy rates in the country, at 3.8 per cent – but this is up from 2.4 per cent in the fourth quarter of 2008.
“The [Calgary] market has an influx of sublease space – which now accounts for 37.9 per cent of total vacant office space – one of the highest rates in Canada,” Colliers said.
“These sublets, along with impending building completions, have combined to drive rents down to an average of $52 a square foot in the downtown core, a reduction of 6.3 per cent since the fourth quarter of 2008.”
In Toronto, the downtown vacancy rate has risen to 4.7 per cent, from 4.5 per cent in the fourth quarter of 2008, and the average rent has fallen by 6 per cent to $54.30 a square foot.
In Montreal, the downtown office vacancy rate has increased to 4.4 per cent from 3.9 per cent, but the average rent has remained unchanged at $35 a square foot.
In Ottawa, the vacancy rate has increased to 3 per cent from 1.7 per cent, and the average rent has fallen 10 per cent to $45.50.
The office market in Edmonton remains strong, with a vacancy rate of 2.8 per cent and average rents of $46.10 a square foot, up slightly from average rents in the previous quarter.
Vancouver's vacancy rate has increased to 2 per cent from 1.8 per cent in the fourth quarter of last year, with average downtown rents down 14 per cent to $48 a square foot.
Saskatoon has the lowest office vacancy rate at 0.8 per cent.
Similar findings were reported last month by property firm CB Richard Ellis.
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