Weak demand for office space will cast a shadow over the commercial real estate market, resulting in a marginal increase of Canada´s office vacancy rate to 10.8 per cent in 2003 compared to 10.4 per cent in 2002, according to Royal LePage Commercial´s annual market survey forecast.
The full survey will be released on December 4, at The Real Estate Forum, an annual commercial real estate industry conference.
Corporate restructuring over the past two years emptied a lot of desks, but many companies held onto space in anticipation of future growth. As companies rehired, space densification and ´phantom vacancy´ fulfilled their need for space. Unused or phantom space is estimated to be between 4 and 6 per cent of all leased space, allowing companies to expand without having to lease more space. Office space densification makes more efficient use of space, requiring less space per employee.
From 1988 to 1994, a 1.5 per cent average annual increase in office employment boosted occupied office space by 1.7 per cent. Since 1995, a 3.9 per cent average annual increase in office employment only yielded a 1.5 per cent gain in occupied office space. Phantom vacancy, densification, and deferral of decision-making because of uncertainty about economic direction are all contributing factors that affected the weak demand for office space, even with modest office employment growth.
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(source: Royal LePage Limited)