Canadian office markets show signs of life: report

TORONTO (Reuters) - Demand for Canadian office space remained weak in the third quarter, but signs suggest improving business fundamentals are encouraging companies to make new occupancy decisions after a period of pullbacks, according to a report on Thursday.

"Absorption" of office space across Canada unexpectedly shifted to the positive side in the third quarter across most markets, after two "tense" quarters of absorption averaging a negative 2.4 million square feet per quarter, said commercial real estate services firm Cushman & Wakefield.

The term absorption reflects the change in occupied space over a period of time and is considered a measure of demand strength in the market.

"Many companies have finished purging themselves of unwanted space and are once again tackling occupancy decisions," the company said in a release.

Winnipeg led all Canadian markets with absorption of almost 800,000 square feet, while Ottawa, Saint John, Halifax, and St. John's also experienced positive absorption Cushman & Wakefield said.

The Toronto market showed strong absorption of more than 350,000 square feet, rebounding from the past two quarters when absorption averaged negative 770,000 square feet per quarter.

In Alberta, absorption was negative in both Calgary and Edmonton. Calgary continued to "bear the brunt" of soft natural gas prices, the report said, and the city's office market was worst overall in the country with absorption at negative 690,000 square feet over the quarter. Edmonton reported negative absorption of 185,000.

Vancouver's central area also saw slight negative absorption, but its suburban markets did not fare as well, as tenants downsized or closed due to the economic downturn.

"It's too early to say that we're out of the woods, however, our research proves we're faring better than expected," said Pierre Bergevin, president and chief executive officer of Cushman & Wakefield.

Vacancy rose across Canadian markets, climbing to 8.2 percent from 7.6 percent in the second quarter, and was mostly attributable to new supply.

Cushman & Wakefield, the world's largest privately held commercial real estate services firm, also said leasing activity in some markets improved over the third quarter.

(Reporting by Ka Yan Ng; editing by Rob Wilson)