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Businesses were keen to snap up space in major new developments in the last couple of years in downtown Toronto and were able to absorb the higher rents, the report from Newmark Knight Frank Devencore found.
“The substantial demand for the new breed of office space has led to late-stage discussions for at least three new developments,” said Allan Schaffer, President and Broker of Record of Devencore Realties Corporation Canada Limited, Brokerage.
“For example, Oxford is currently negotiating with a major financial tenant to launch a 700,000 to 900,000-square-foot building near WaterPark Place; Cadillac Fairview is marketing an 800,000-square-foot mixed-use project at 16 York Street; and in the Downtown West area Allied Canadian is actively seeking lead tenants focused on the new media industry for a proposed 240,000-square-foot tower.”
However, he added that the projects were several years from completion and that new office space inventory over the short term will be “limited”.
Older Class A buildings being vacated by tenants moving into newer buildings could provide opportunities for new renters Schaffer also said.
Vacancy rates are higher outside of Toronto’s downtown area, the report also stated, which could translate to better deals for tenants.
The rest of Canada has seen an overall trend of vacancy rates declining. Overall vacancy rates for Class A and Class B office space fell from 7.1 per cent to 6.8 per cent over the last six months of 2010. This was even as the inventory of such space was steadily increasing.
Should Canada’s economy continue to recover, vacancy rates across the country will continue to fall, Newmark Knight Frank Devencore predicted, and rents will continue to creep upwards.
Editor’s notes: In Q1 2023, Toronto’s office space vacancy rate was 10.4 per cent reflecting a 1.4 per cent increase year on year.
In the same period, the average net asking rent was 25.6 CAD per square foot which represented a 2.6 per cent increase year on year.
At the time, there was 5.7 million square feet of new office space under construction.
In 2022, 2.4 million square feet of space was taken up by way of office lettings.