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Turns out COVID isn’t the only thing we have less of than most parts of Canada.
We also have fewer Office Space for Rent signs.
Statistics released Thursday by commercial real estate firm CBRE show Halifax’s overall office vacancy rate dropped to 15.4 per cent in the third quarter of 2020, down from 16.1 per cent in Q2, bucking the trend of increased vacancies in Canada’s other markets.
The Halifax market is also stronger when it comes to sub-lease space, akin to a sublet by a residential renter.
“I look at other large markets across the country, Toronto, Vancouver, Calgary, we’re seeing significant spikes in sub-lease vacancy,” said Andrew Bergen, managing director for CBRE in Halifax. “And I think that’s directly tied to COVID and the situation other provinces are in. Atlantic Canada, Halifax, we’re in a bit of a unique situation out here, and we haven’t seen that spike in sub-lease because most offices have reopened in some capacity.”
Unlike most office markets in the country, Halifax’s sublease listings also decreased this quarter, by 23.9 per cent, now representing 3.1 per cent of all vacant space. CBRE says the number of sublet vacancies has remained stable throughout 2020, which it says demonstrates resiliency in dealing with the impacts of COVID-19.
Bergen points out that in Toronto, for example, some companies have declared they won’t bring people back to the office until next year, which he doesn’t see here.
“Having to carry empty office and pay full freight while people aren’t using your office, well, you’re going to have to do something about your real estate,” he said. “Out here, people are in the office, albeit in a limited capacity, but we’re in a unique situation in that offices are somewhat full these days.
“Anytime there’s an economic slowdown, the first thing we see is a spike in sub-lease space. What that does is soften pricing of lease rates, so the more sub-lease space there is on the market, that competes with direct vacancy, with landlords potentially bringing down pricing.”
In the industrial real estate market, the start of construction on Leon’s 150,000 square foot warehouse this quarter in Dartmouth contributed to the addition of 208,600 square feet to the development pipeline.
It’s just the second quarter since the fourth quarter of 2012 that the under-construction total has surpassed 200,000 square feet.
“That’s a healthy development pipeline, something we haven’t seen in a while,” Bergen said. “The market on the industrial side has been running extremely tight for a number of years, so it’s become something of a supply issue. We’re seeing more development under way but I think a lot of the projects that are being built are owner occupied, so I don’t think that will have a huge impact on vacancy.”
The CBRE report says that for the third consecutive quarter, Halifax’s downtown office market has outperformed the suburbs, with 14,000 square feet of positive net absorption in Q3 2020. That caused the downtown vacancy rate to compress by 20 basis points to 19.7 per cent.
“I think Q4 is going to be an interesting quarter, given that a lot of the government support programs have ended,” Bergen added. “I think we’ll see in the next three months who’s going to survive and who just can’t, and are going to close their doors.”