In a market where supply far exceeds demand, office tenants can seize opportunities to migrate to higher quality or newer buildings. This race for quality has been observed in all Canadian metropolitan city centers since 2020. Office tenants can seize opportunities to migrate to better quality or newer buildings. It will be the turn of tenants in class B buildings to be courted to fill the numerous vacancies in class A buildings at very competitive costs.
The overall market availability rate has been steadily increasing since March 2020, from 10.3% to 19.4% to date. Rental activity was stronger this year on the South Shore and in the West Island, particularly around REM stations. However, the intense construction activity seen between 2018 and 2023 around transit-oriented suburban developments has now ended, with current construction costs no longer justifying the launch of new projects.
Sublet as a percentage of all available space reached 15.7% this quarter, compared to 14.0% in Q3 2023 and 15.1% in Q4 2022. Over the past quarters, high-quality subleases have found takers, while others have gradually been taken off the market as they reached the end of their terms. However, new subleases have been added at a sustained pace in 2023, suggesting that space rationalizations are not yet complete.
33,50$ / pi²
Average net asking rent
During the last quarter, rents in prestige office buildings seem to have reached a ceiling, with a net rent of $33.50 psf, widening the gap by more than $10 psf compared to rents in class B buildings, which stand at $19.11 psf. These assets continue to stand out in the market, with an overall vacancy rate of 9.50%, compared to almost 20% for the market as a whole.
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