New Data Suggest Office Workers Are Returning To Downtown Halifax
HALIFAX — One major effect of the Covid-19 pandemic has been a hollowing out of Halifax’s downtown.
As businesses moved to a work-from-home model their employees left offices in droves. That left many businesses that catered to the office crowd in rough shape.
As the pandemic wanes and social distancing measures are relaxed, it remains an open question whether, how quickly, and how many workers will return to the office.
New data from Turner Drake shines a light on where Halifax’s office market currently sits — and offers some insight into where it might be going.
Alex Baird Allen is with Turner Drake’s Economic Intelligence Unit. Right now, she says, there are still a lot of empty offices in the city.
According to Turner Drake, office vacancy in the city sits at about 14.5 percent. That’s a fractional drop from where it was a year ago but, as Baird Allen explains, it’s still “fairly high.”
In the office market world, five percent vacancy is considered full occupancy.
“We are about 10 percentage points higher than that [in Halifax] and so there is a degree of some level of concern,” Baird Allen says.
So, what does Halifax’s high vacancy rate mean for the city? Are companies fleeing the downtown core forever or is it just a temporary effect of the pandemic?
So far, the general consensus appears to be that office workers will return, but likely not in as big numbers as before.
Baird Allen says “it’s probably relatively early to draw conclusions” about the future of downtown Halifax but that some clues might be hidden in office market statistics.
The good news is that demand for office space in Halifax is on the rise.
From June 2020 to June 2021, demand for office space increased by nearly 12 percent in the city. That’s compared to just a 0.5 percent jump from 2019 to 2020.
“So that’s a pretty significant shift,” Baird Allen says.
But she cautions those numbers need to be taken with a grain of salt. She says some of the spaces that have come on the market were likely already leased before the pandemic hit.
She also points out that office leases are generally signed for five-year terms. That means some companies could still technically be in their offices even though they’re not using them and plan to move to a work-from-home model.
Although those companies won’t show up in statistics until their leases are finally up, market experts often look to “subleases” to quantify them.
Subleasing is when companies rent out their offices to other organizations instead of breaking their lease.
An active sublease market means companies are looking to get out of their offices.
Halifax’s sublease market has been active throughout the pandemic, and according to a recent report from the CBRE, it still is, “with tenants snatching up spaces with shortened lease terms at discounted rates.”
However, CBRE also says subleasing is on the wane, decreasing 6.9 percent over the previous quarter.
Baird Allen guesses it’s mostly new tenants snapping up those subleases because companies already in an office likely aren’t going to pay to break their leases and move. She says most companies that take over a sublease end up staying, which just means more offices end up occupied.
“So that is actually kind of a positive sign, that sublease space has gone down,” she says.
However, the most important indicator of the future of Halifax’s downtown is probably the city’s all-around growth.
Halifax was growing faster than almost any other city in Canada prior to the pandemic and most indicators suggest that growth will kick back in as the economy recovers.
Baird Allen says she can see evidence of that in the demand for industrial space in the city; high demand for industrial space is usually a sign of a strong economy.
Halifax saw an almost 6 percent increase in demand this year, and the vacancy rate sits at a low 6.3 percent.
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