TORONTO — A new report from CBRE says Canada’s office market has officially experienced one full year of recovery since the COVID-19 pandemic disrupted the sector.   

CBRE said Canada’s office vacancy rate stood at 17.1 per cent in the second quarter, down from 18.7 per cent a year earlier. 

“One year of solid office demand and declining vacancy is worth noting since many still question the office market,” said Marc Meehan, CBRE Canada research managing director, in a news release. 

The report says net absorption rates were positive in seven of 11 Canadian markets, with overall net absorption reaching 1.2 million square feet. Those gains were led by Toronto, Calgary and Montreal, which each had more than 300,000 square feet of office space absorbed in the second quarter. 

The trend comes as employers are increasingly mandating that workers head back to the office.   

Last summer, some of Canada’s largest companies, including several of the big banks, announced plans to shift to a four-day in office work week. Governments ranging from municipal to federal levels have also made moves to increase in office days for workers. 

The report said that fundamentals for downtown office space are improving, with nearly all Canadian cities seeing tightening inventory during the second quarter and all classes of office space recording declining vacancy rates across the country. 

Meehan said the first stage of the office recovery occurred in “trophy buildings” with demand trickling down to the next-best office spaces. 

“The balance of Class A was the primary beneficiary, however even Class B/C vacancy is starting to improve amid a mix of transactional activity and the removal of inventory for building conversions,” he said. 

The report said the vacancy rate for so-called trophy office buildings is only one per cent higher compared with before the COVID pandemic at 9.4 per cent. 

Toronto was found to have the least amount of available top-tier space, CBRE said, with a vacancy rate of 2.6 per cent for AAA office space. 

Meanwhile, CBRE says new office construction starts remain low, with only one new project started in the second quarter.         

The report said that the “thinning pipeline” of new office supply has reached a historic low, and is expected to remain restricted with no significant deliveries coming beyond 2027. 

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