Across North America, an office development boom is underway, with 146,500,000 square feet of space under construction right now, according to a recent report by Colliers International.
Of this under-construction office space, nearly 20.8 million square feet are being built in Canada – which might seem like a fairly modest proportion of North America as a whole. However, relative to the size of the office markets and population in each country, Colliers said that Canada’s pace of office construction is 87 per cent higher than that of the U.S.
Why so much more activity in Canadian office development than in the U.S.?
The Colliers report said, “Reasons for Canada having a higher proportion of the overall construction compared to its overall population include:
- Canada benefiting from high growth in office based employment industries;
- Canada’s substantially lower office vacancy rate is driving new office construction (only three United States cities have vacancy rates lower than the Canadian average of 9.2 per cent); and
- Canada’s more open immigration policies and societal multiculturalism are enabling employment and population growth.
“Overall, Canada’s three largest markets make up half of the top six markets in terms of new premises being added to the market, with Vancouver in first place adding 6.8 per cent [of the new office space in Canada], Toronto in fifth place adding 4.2 per cent and Montreal in sixth adding 3.6 per cent.”
The ultra-low vacancy rates and corresponding need for new office supply are key to the high levels of construction. Vancouver and Toronto were recently named the two office markets with the lowest vacancy rates in all of North America, both at just 2.6 per cent, with San Francisco coming in third.
Colliers is not concerned that the wave of new supply of Canadian office space will become a glut that remains unabsorbed. The commercial brokerage added in its report, “Canada has a higher office density per census population than the United States. This combined with a lower average [office] vacancy rate (9.2 per cent compared to 11.6 per cent) show that Canada has a well urbanized population of knowledge workers and will more easily absorb the new office buildings under construction. Without the capacity to allow employers to grow and new companies to enter the market, the potential for growth in Canada would be muted; the new wave of office construction is further cementing Canada as a desirable location for new office employment growth.”
The report comes as major U.S. companies such as Apple and WeWork reveal plans to take up space in under-construction office buildings in Vancouver and Calgary. They are following the footsteps of companies such as Microsoft and Amazon, which will set up its new Vancouver headquarters in the redevelopment Canada Post building.