Canada braces for building boom
The office market is expected to require an extra 16 million sq ft of space by 2010
More than a decade of stagnation in Canada's office market is about to explode into a construction boom.
A new study predicts that demand for office space will see the construction of the equivalent of 16 new 50-storey office towers in the next five years. But even that level of building will hardly make a dent in the office market.
The study by CB Richard Ellis, an international firm specialising in industrial real estate, estimated that the Canadian office market would require an additional 16.4 million sqft of space by 2010.
Blake Hutcheson, president of CB Richard Ellis, said few new office towers had been built in the past decade. As a result, 'demand will begin to outstrip the available supply in the foreseeable future, so developers will take advantage of the opportunities to construct new buildings'.
One significant element of the anticipated boom is that 60 per cent of the new construction will be in downtown areas. That contrasts with the 1998-2002 years when 60 per cent of office construction was in the suburbs.
As expected, Toronto, Canada's most populous city, will be leading the boom. About 1.1 million sq ft of office construction is already under way, and the total will reach 5 million sq ft in the next five years.
One major work in progress is a 48-storey tower planned by Cadillac Fairview Corp.
Construction on the tower will begin as soon as sufficient space is pre-leased.
However, CB Richard Ellis identified Calgary as 'the nation's hottest office market'. The continuing explosion of oil prices is keeping the economy of Calgary and the rest of the province of Alberta at temperatures close to a boil. Calgary has nearly 2 million sq ft of office construction under way, with plans for another 3 million.
Surprisingly, Ottawa and Winnipeg are also sharing part of the boom. Each city has 1 million sq ft under construction, with another 1 million on the way.
Perhaps not surprisingly, after the furious pace of construction in Vancouver in recent years, the elegant west coast city is proceeding relatively slowly, with only 1 million sq ft of new office space expected by the end of the decade.
Despite the increased pace of construction, Mr Hutcheson expected the national vacancy rate for downtown office accommodation to continue its decline 'for the foreseeable future', from the current level of 9.1 per cent.
Although the boom predicted by the study seems sizeable, Mr Hutcheson said it would amount to only about 1 per cent in inventory, and should not have a negative impact on the market.