2017 Global Office Forecast

Over 700 MSF of New Office Under Construction

TORONTO, July 25, 2017 – Across the globe, an unprecedented office building boom is underway with more than 700 million square feet (msf) of space under construction that will deliver between now and the end of 2019, Cushman & Wakefield’s Global Office Forecast reports. That’s the equivalent of recreating five cities worth of office inventory – Washington, DC, Dallas, London, Singapore and Shanghai – over the next three years.

The report details economic drivers, supply and demand forecasts and prospects for rent growth in more than 100 cities around the world.

Although demand, as well as job growth, will remain healthy through 2019, totaling approximately 520 msf, it will fall far short of supply, which will cause vacancy to rise in most cities around the world. From that perspective, the world is overbuilding.

Or, not. It also has been abundantly clear throughout this global expansion that most occupiers generally favour new, high-quality office space over older, Class B and C product. In the U.S., for example, newly built high-quality space has accounted for 65% of all office absorption since 2012. More often than not, developers have been rewarded throughout this cycle for delivering prime product, even in markets where vacancy is elevated. Additionally, the combination of an accelerating global economy with low interest rates is a recipe for healthy office-demand conditions.

“Developers are certainly placing some big bets on new product, but the bulk of it is concentrated in the major global cities, which is precisely where the greatest appetite is for these shiny new buildings,” said Kevin Thorpe, Cushman & Wakefield Global Chief Economist. “I’m less concerned about the new space leasing up, because in a sense, that is supply rushing to meet demand. It’s giving tenants exactly what they are asking for. I’m more concerned about what this wave of supply means for lower-grade product, which I suspect will have a difficult time competing.” 


The economic forecast for Canada generally looks bright with expected growth in commodity-exporting throughout 2017, driven by an accommodative policy, firming oil prices and stronger global demand. Exports account for one-third of the Canadian economy and about three-quarters of exports are bound for the U.S. Assuming trade negotiations remain positive between the neighbouring countries, and the current American government doesn’t impose barriers and tariffs, a strong U.S. outlook bodes well for economic growth, supporting sound real estate fundamentals within Canada. 

Overall, the Canadian office sector remains healthy, with the exception of the oil-producing markets. In the report, office vacancy rates across major global cities is forecasted, with four Canadian cities securing prominent rankings. By 2019, Toronto is forecasted to rank 1st – as the tightest market in the Americas and will take 4th position globally with an office vacancy of 3.9%. Vancouver, is forecasted as the 2nd tightest market in the Americas and will take 9th position globally with a vacancy rate of 6.3%. Ottawa will secure 4th position in the Americas by 2019, and jumps to 14th globally with a 7.3% vacancy rate. Winnipeg will rank 5th in the Americas and falls to the 15th position globally from its present ranking of 7th with vacancy rising from 4.3% to 7.4% in 2019. 

Technology has been a big contributor to growth in Canada’s two strongest markets, Toronto and Vancouver, and it’s having an impact on space requirements and rental appreciation. 

“The Canadian government is making huge investments in technology and we’re seeing its impact in the commercial real estate space,” said Chuck Scott, CEO Canada. “While traditional growth drivers such as the banking industry will always remain strong, particularly in Toronto, we’re seeing an unquestionable shift in whose occupying space and where it’s being occupied.” 

Rental rates are currently strong in most Canadian markets; however, on a national scale they are expected to take a hit in 2017. Large shares of vacant space in the weaker, commodity-sensitive markets such as Calgary and Edmonton will place pressure on national asking rental rates with an expected decline of 1.5% in 2017 before trending upwards in 2018 (by 1.1%) and 2019 (by 3.1%). This rebound in rents later in the cycle will be driven in part by softer markets regaining traction. That said, Toronto and Winnipeg lead the country with anticipated upward pressure on rental rates, ranking 4th and 5th globally, with a forecast annual rent growth of 6.6% and 6.4% respectively. Tight conditions in Toronto and new product in Winnipeg will contribute to the rise. 

Construction activity in Canada is healthy with 8.9 msf slated for completion by 2019; however, 34% of all deliverables in the pipeline are coming to Calgary and Edmonton – two of the hardest hit cities since the Global Financial Crisis and the least two cities that require inventory. 

“Calgary and Edmonton are certainly feeling the impact from the wave of new supply arriving to market, particularly because demand in these markets has eased so dramatically. Landlords will need to get creative and invest in their assets in order to create a differentiating advantage,” said Stuart Barron, National Director of Research, Canadian Markets. “It’s quite the opposite In Toronto. We can’t get enough supply. Tight conditions and strong growth are driving rents upward. The 2.9 msf of new construction arriving to market before 2019 will provide little relief for this high growth market.” 

Global Development

The development boom will be led by Asia Pacific, particularly Greater China. In fact, nearly 60% of the world’s new construction will be concentrated in the Asia Pacific region. Within the region, new supply is concentrated in a handful of markets: Beijing, Shenzhen, Shanghai, Manila and Bangalore. Indeed, those five markets account for 55% of construction taking place in Asia Pacific and over one-third of construction worldwide. Much like the supply side, the demand side of the equation is strongest in Asia Pacific. Beijing will have the distinction of leading the world in both supply and demand growth.

The Americas region is also in the midst of a robust construction cycle, peaking in 2017 and tapering offer somewhat in 2018 and 2019. Still, the U.S., Canada and Latin America will all build more space than they will absorb over the next few years. Again, it varies greatly from one city to the next, and the bulk of new space is concentrated in the largest cities, many of which arguably need it the most.

The development pipeline also is ramping up throughout Europe, but not nearly to the same degree. Some European cities, such as Paris, Vienna, London and Brussels, will hit a cyclical high in terms of new construction over the next two years, while Madrid will show steady growth amidst global deceleration of rental-rate growth. Then again, those same cities report vacancy rates that are lower than pre-recession levels. 

“Broadly speaking, supply and demand seem to be the most balanced in Europe relative to the other global regions,” Thorpe said.

Key Facts 

• The top five lowest-vacancy markets in the Americas by 2019 are mostly Canadian cities: Toronto (3.9%), Vancouver (6.3%), Orlando (7.2%), Ottawa (7.3%) and Winnipeg (7.4%). 

• Top 10 fastest rent rate growth markets in the Americas, includes four Canadian cities: Toronto (6.6%), Winnipeg (6.4%), Edmonton (4.0%) & Vancouver (3.7%)

• Toronto’s office market is expected to remain tight with 2.9 msf of space slated for completion by 2019 just bumping up against 3.0 msf of net absorption expected over the same period of time. 

• Canada’s Top 5 Office-Using Job Growth markets through 2017-2019 ranked in order: Vancouver, Toronto, Montreal, Ottawa and Calgary. 

• Calgary and Edmonton, two of the highest vacancy markets, will capture 34% of all new developments between 2017 and 2019.

About Cushman & Wakefield

Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 45,000 employees in more than 70 countries help occupiers and investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. 2017 marks the 100-year anniversary of the Cushman & Wakefield brand. 100 years of taking our clients’ ideas and putting them into action. To learn more, visit www.cushwakecentennial.com, www.cushmanwakefield.com or follow @CushWake on Twitter.


Edna Canning-Park

Edna Canning-Park

Communications Manager

Toronto, ON

Phone +1 416 359-2581

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