February 12, 2010
Economic Snapshot
Office construction fundamentals still weak, but starting to stabilize
JOHN CLINKARD
consulting economist, CanaData
Commercial office construction for Canada as a whole will probably remain in the doldrums at least for the next four to six quarters, according to a recent report by Cushman & Wakefield.
The national office vacancy rate – the average of the 13 largest metro areas in the country – increased from 8.2% to 8.5% in the fourth quarter of 2010, the highest level since the second quarter of 2002.
Office vacancy rates have moved into double digits in Calgary (12.4%) and Moncton (12%), while exhibiting relatively large increases in St John’s, N.L., Winnipeg, Edmonton and Toronto.
This weak outlook for commercial office building is reinforced by the fact that over the past 12 months the total value of commercial building permits issued in Canada has declined by 15.1%, to the lowest level since 2005.
Consistent with the high level of office vacancy rates in Calgary, the value of commercial building permits issued in 2009 dropped by 28.9%, to the lowest level since 2005.
Also, the value of commercial permits has fallen sharply in Vancouver (-43.2%), Saint John, N.B. (-33.7%), St. John’s (-27.9%), Montreal (-15.2%), Toronto (-19.2%) and Edmonton (-12.6%).
Although there is still ample evidence that the overall health of the economy is fragile at the start of 2010, one key indicator of office demand, office-based employment, appears to be showing tentative signs of picking up steam.
Major contributors to this stronger pattern of office-based job growth include Vancouver, where office-based employment was up by 5.6% year over year in January compared to a year-over-year decline of -16% in March 2009.
In addition, office-based job growth is still relatively strong in Toronto (+6.5%), Montreal (+5.5%), Winnipeg (+3.8%) and Halifax (+3.3%).
John Clinkard has over 30 years’ experience as an economist in international, national and regional research and analysis with leading financial institutions and media outlets in Canada.
Data sources: Statistics Canada and Cushman & Wakefield/Chart: Reed Construction Data, CanaData
