CANADIAN OFFICE VACANCY RATE SETS RECORD
In 2022’s fourth quarter, the proportion of Canada’s office space sitting empty reached a record 17.1 percent, according to real estate services firm CBRE, even though the country’s economy has fully reopened from its COVID-era lockdowns.
The amount of needless space grew as more new office towers, many of which broke ground before COVID arrived, were completed. Newly opened buildings added five million square feet to the mix in 2022’s final three months.
Also, the combination of the shift to remote work and major tech firms laying off large chunks of their workers boosted the volume of unused floorage, CBRE noted.
In Toronto, Canada’s largest city, the vacancy rate rose to 13.6 percent; in Vancouver, the share of office footage going unleased spiked sharply to 9.8 percent. Calgary, Canada’s oil capital, sported a staggering vacancy rate of 32.6 percent.
“Remote work continues to get all the attention, but the main reason vacancies have gone up are new supply—particularly in Vancouver and Toronto—the repricing of the tech sector, [and] concerns about a possible recession in 2023,” Paul Morassutti, chair of CBRE Canada, told Yahoo Finance Canada.
For example, Shopify scratched its plan to move into a glitzy new downtown Toronto mixed-use development and decided instead to renovate its current space, a decision reflecting all three of those factors.
In Vancouver, tenants are leaving the city center for suburban digs.
Halifax, the city of 431,000 on the Atlantic island of Nova Scotia, is the first to reduce its office vacancy rate to pre-COVID levels, CBRE noted.
The national vacancy rate should ease now that fewer buildings are under construction, CBRE predicted: only 11 million square feet are now in development, the smallest number since fall 2017, according to CBRE.
Also, some builders now require greater commitments to space before breaking ground on new office square footage.
“Longer term, we expect tech demand to come back, we will work our way through the new supply, then we will get through a recession,” Morassutti said. “Forecasting the longer-term impact of remote work is more difficult.”
TREND FORECAST: Longer term, we continue to forecast that office demand by giant tech companies will not come back to pre-COVID War levels.
Remote work is now the norm that workers expect and protect; steadily advancing technologies such as augmented and virtual reality will continue to make remote work seem as connected as centralized officing has been.
While some companies continue to mandate 40 hours and five days in a central location, such policies will gradually disappear for most workers—and so will the need for office space that once housed them.
U.K. COMMERCIAL PROPERTY SALES PLUNGE TO TEN-YEAR LOW
About £7 billion worth of commercial property sales took place in Great Britain in last year’s final quarter, data service CoStar reported, the least per quarter since 2010 when the service began tracking the data.
Deal values slid throughout last year: £21 billion in the first quarter, £17 billion in the second, and £11 in the third.
In the first quarter of 2022, investors were looking forward to travelers’ return, especially the traditionally lavish spenders from China and other Asian countries.
Then Russia invaded Ukraine, the West erected sanctions, inflation ran on, interest rates began their climb, China locked down yet again, and the COVID virus reappeared in new forms, all of which soured the outlook for profitable investments in commercial property.
Also, steadily rising interest rates and the Bank of England’s promise of a long, grueling recession have robbed many buyers of their taste for acquiring new properties, the Financial Times noted.
As a result, prices for commercial properties have slipped an average of 15 percent since June 2022, real estate service firm CBRE said. The company projected that prices will continue to slide this year.
About a third of last year’s total investment in commercial properties went to office buildings, with Asian buyers being particularly active, CoStar said.
However, 80 percent of those deals were done in the year’s first half, with the purchase of a handful of “trophy assets” accounting for most of the spending, according to the FT.
Another £13 billion went to warehouses, another sector since walloped by inflation in consumer prices and the growing recession across the U.K.
TREND FORECAST: The market for commercial real estate in the U.K. will languish at least through 2023 as the union works its way through recession and recovery.
DUBLIN OFFICE SPACE: LEASED BUT NOT USED
In Ireland’s capital city, 32 percent of office space is under lease but unused as major tech firms, including Twitter and Salesforce, that were lured to the country in recent years by its tax breaks are cutting back operations.
Meta Platforms recently completed its European headquarters in the city but decided last month to occupy only part of the building.
The amount of empty space will increase, brokerage firm Lisney said in a new report cited by Bloomberg.
Major tech firms have accounted for between a third and half Dublin’s office leasing market in recent years, according to Lisney.
“Many of the large tech companies had very ambitious staffing targets over the last three to four years and may never have been able to fill all the office space they hold,” the report noted.
The rise of remote work as a new normal also has left office space idle.
As bad as the office use rate is now, it has improved since the COVID crisis has waned. Leasing is up by about 35 percent since 2021, Lisney reported, as smaller, local firms find bargains among the move-in-ready spaces international tech giants have let go.
“We now expect to see some of the smaller companies, many of whom are indigenous, take advantage of recent trends, hiring staff, and taking additional office space,” Lisney wrote.
Financial, pharmaceutical, professional, and public-sector concerns seem especially prospective, the report said.
Dublin’s overall office vacancy rate stood at about 13 percent last week.