In Defiance Of Pandemic, Halifax Sees Office Vacancy Rates Drop
This is part of a series of stories on the shifting market for commercial and residential real estate in Maritime cities like Saint John, Moncton, Halifax and Fredericton.
HALIFAX — As Covid-19 threatens to hollow out office buildings everywhere, with a trend toward remote work during the pandemic, Halifax’s commercial real estate market is so far defying those expectations.
According to the latest numbers from Turner Drake and Associates, commercial vacancy rates dipped to 14.02 percent in Halifax last year, compared to 14.87 percent in 2019.
That drop is already significant in the middle of a pandemic that’s driving workers from offices in droves. But it also happened as major developments finished up and added significant new office space in the city.
As Turner Drake’s Alex Baird Allen explains, even though new office space was added to the market over the past year, “demand was enough to more than keep up with that. So the vacancy rate actually tracked downwards. And that is a really optimistic sign to see that increase in demand overall.”
Despite the surprising news, however, Baird Allen warns there might be some trouble on the horizon.
Sublease Space Up Significantly
One of the first things market experts look at to assess the health of the commercial real estate market is sublease space, which is when companies rent out their offices to other organizations, rather than break their lease.
“What you’ll end up seeing sometimes is if companies don’t intend on coming back to their space, and they vacated it due to [something like] Covid-19, then the first step would be that they would try and sublease it out,” Baird Allen says.
And as Andrew Bergen, a senior vice president with CBRE Ltd., explains, subleases are an important indicator of the future health of the market.
“Any time you go through a downturn, or crisis, that’s kind of the first warning sign or red flag. Oh, there’s an influx of sublease space from the office side,” he says.
According to CBRE, the last quarter of 2020 saw sublease space nearly double, from about 61,000 square feet to more than 120,000.
Short-Term Trouble Ahead?
“It has gone up, you know, a little bit over the last quarter or two, but I think we’re in a fairly decent position compared to other major markets,” Bergen says.
Barid Allen agrees. She believes Halifax’s commercial real estate market will be fine in the long term but says things might get a little bleak short-term.
Halifax hasn’t been hurt by the pandemic as badly as many other cities, however, Baird Allen points out “we are still at the whim of broader economic forces.”
The commercial office market is tied closely to the city’s economic health. And while most are projecting a rebound in 2021, “that’s going to be impacted by economic forces outside of the borders of Nova Scotia, over which we haven’t got a whole lot of control,” she says.
She believes this year will likely see demand for office space go down and vacancy rates pick back up as even more inventory is added to the market.
Bergen echoed Baird Allen’s assessment.
“We’re starting to see a few of those signs of, I wouldn’t say a softening market, but certainly factors that have impacted other markets across the country and across the globe have started to trickle into Atlantic Canada,” he says.
Bergen admits it’s difficult to predict what the upcoming year will look like. Cast your gaze even further, he says, and it’s essentially impossible.
Offices Not Going Anywhere
One point both Bergen and Baird Allen agree on, however, is that offices won’t disappear in a post-pandemic world.
“It’s not random that we work in offices,” Baird Allen says. “It improves working conditions. People get together and we share ideas and offhand comments in the hallway that can lead to great things. There’s a strategy and advantage to having your employees together in an office space. And so, in the majority of instances, I think people will come back to the offices. It just depends on how quickly we’re able to do that.”
Bergen also points out that even when companies return to their offices, there’s a good chance they won’t need as much or even the same kind of space.
“We’re all trying to figure out how much space we need, who needs to be in the office, who wants to be in the office, who’s happy working from home. So I think flexibility absolutely has been elevated over the past 12 months and employees are demanding that,” he says.
“There are just so many, so many variables at this point, it’s really difficult to put your finger on one of them and say, Okay, we’re moving in this direction.”
Trevor Nichols is a staff writer with Huddle in Halifax. Send him an e-mail with your story suggestions: [email protected].
Other stories in this series:
- Saint John Commercial Office Spaces Not Emptying Because of Covid-19
- Moncton’s Office Buildings Are Emptier, But Industrial Development Is Booming