Market Trends of Canada Flexible Office Space Industry
Toronto is set to revolutionize the market in the years to come.
The Toronto market stands out as the national leader with regard to flex office inventory, representing 40.8% of the country’s total flex inventory, totaling 2.7M square feet. Canada’s next three largest markets, Vancouver, Montreal, and Calgary, proportionately take up 1.4M square feet (20.8%), 836,000 square feet (12.7%), and 784,000 (11.9%) of national flex office inventory, respectively. The majority of Canadian markets remain in the infancy stage of flex office space, with eight of the twelve markets totaling less than 300,000 square feet of inventory.
With further compression of the region’s 4.0% office vacancy rate (Q4 2019), acceleration of rental rate growth in core submarkets, and home to the country’s largest tech hub, flex office is incredibly popular among Toronto’s tenants as it allows them to be nimble in a rapidly evolving market.
Lately, the office space lease numbers are on an upswing. IBM Canada announced a new office in Downtown Toronto in 2021. This new space will include an AI and hybrid cloud client showcase center, collaboration spaces for use by both employees and clients, and space for IBM Garage, a globally recognized design approach to innovation and digital transformation. This space will be located at 16 York Street, Toronto.
Recently, CBRE, one of Canada’s largest commercial real estate firms, released its Q1 2021 report, which highlighted the Downtown Toronto core. CIBC Square, a flagship development by Ivanhoe Cambridge and Hines, completed construction in the first quarter of 2021, bringing 1,500,000 sq. ft. of Class A space to the Downtown Toronto market, with CIBC being the anchor tenant.
In 2022, the asking rent for office space in Downtown Toronto amounted to CAD 41.9 per square foot. Downtown South Toronto was the most expensive submarket in the city, followed by the Financial Core submarket. Although quantitative measures continue to point to a suppressed market, there are signs of optimism: an uptick in qualitative measures such as tour activity and interest from prospective tenants, as reported by brokers and landlords.
Growing Startups in Canada boosting the market
The Canadian government has been actively supporting entrepreneurship and innovation through various programs, grants, and tax incentives. Initiatives like the Startup Visa Program have attracted foreign entrepreneurs to launch their ventures in Canada. Cities like Toronto, Vancouver, Montreal, and Ottawa have emerged as vibrant tech hubs, attracting startups with a diverse pool of talent, research institutions, and a strong entrepreneurial community. Canada's strategic location and trade agreements offer startups access to a broad global market, including the United States and international markets.
Canadian startups span a wide range of industries, including technology, artificial intelligence, biotech, clean energy, fintech, and more. This diversity has contributed to a robust and resilient startup ecosystem. Several Canadian startups have achieved success, leading to significant exits through acquisitions or initial public offerings (IPOs). These success stories attract further investment and talent to the Canadian startup ecosystem. The perception of entrepreneurship has evolved positively in Canada, with more individuals and graduates considering startups as a viable career path.
