Only Ottawa (6.9%), Quebec City (4.7%) and Regina (1%) had lower office vacancy rates.
Looking ahead to this year, the report said Calgary will continue to see major action in offices, with the vacancy dropping to 5.2%, which will put it below Quebec City and Ottawa this time around, but Regina will remain the lowest despite rising to 4.1%.
Vancouver is another city expected to see significantly lower office vacancy rates in 2012, down from 7.6% last year to 6.4% this year, according to Avison Young.
The forecast also included a study of the U.S. market, but as with the residential sector, Avison Young Chairman and CEO Mark Rose found the commercial market to be stronger in Canada.
“There is a dichotomy in the North American commercial real estate market,” he said. Canada is experiencing a period of stability and modest growth, while the United States continues to search for traction in the recovery process.”
That yet-to-recover U.S. market has, nonetheless, attracted an increasing number of Canadian investment dollars.
“Given the relatively small investable universe in Canada, we continue to notice a growing trend of Canadian buyers heading south of the border,” said Rose.
While U.S. cities have much higher office vacancy rates, the trend in many is improving. For example, Chicago’s vacancy rate went from 20.2% at the end of 2010 to 15.1% in 2011.
On the retail side, the trend has been U.S. companies setting up shop in Canada, including Target, J. Crew, Express and Marshalls.
In the industrial sector, years of decreasing vacancy may return speculative development this year in some markets, said the report.
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In 2011, Calgary already bested most major cities when its vacancy rate dropped down to 7.2%.