After many quarters of defying expectations of a recession, Canada’s job market has weakened noticeably over the quarter. While unemployment at 5.5% remains well below the long-term average, job losses have been concentrated in areas tied to commercial real estate, with construction being the number one source of job losses followed by major office tenants within the government and technology sectors.
- Office vacancy rose in most markets, as the overall vacancy rate now exceeds 14%. Office vacancy has been rising for 3.5 years and seems likely to continue rising in the short term.
- Despite these obstacles, asking rents remain near record high levels in many markets. This reflects the removal of aging buildings for redevelopment, landlords’ desire to negotiate other concessions beyond lower rent, and the construction of new AAA-Class offices.
- After a seemingly unstoppable years-long run of rising rents and declining vacancy, industrial availability has increased each quarter of 2023 so far. This is not to suggest the market is weak, as rents remain at record highs and absorption was still strongly positive in Q3, as leasing demand for scarce space remains strong in logistics and fulfillment.