Downtown Toronto Office Vacancy Falls to Below 2008 Global Recession Levels

Further Record Low Industrial Availability Rates Continues Toronto’s Emergence as a Leading Commercial Real Estate Market

 Toronto – October 3, 2016 – Toronto’s Downtown Office vacancy rate fell 50 basis points (bps) in Q3 2016 from 4.9% to 4.4%, representing the lowest rate since Q2 2008 and the start of the global economic recession.  In Q2 2016, Toronto emerged as having the lowest downtown vacancy rate in a major North American market and, according to the results of the CBRE Limited’s National Office and Industrial Third Quarter 2016 Statistical Summary, a further decline in vacancy in Q3 appears to have consolidated this position.  In addition, its industrial market continues to break records with the availability rate falling for the sixth straight quarter and dropping by 30 bps to 3.4%, yet another record national low. 


“This quarter demonstrates that low vacancy rates are not a flash in the pan, but reflective of the solid underlying fundamentals of Toronto as a commercial real estate market.  Downtown office vacancy rates have been on a steady decline since 2013, despite almost 4 million sq. ft. of new offices being delivered in the same time.  When you also add in that our industrial market continues to set records, this is, without doubt, an unabashed good news story for the city and one that speaks to the vitality of its economy.”


Declining vacancy rates are not just limited to Toronto’s Financial Core which fell from 6.5% to 5.5% in the quarter. Vacancy in the Downtown West submarket has halved from the start of 2016 from 10.6% to 5.3% as the new supply delivered to that market in 2015 has been absorbed.  Robust tenant demand has also seen vacancy in Downtown North fall from 8.3% a year ago to 3.1% in Q3 2016.


“What’s clear is Toronto’s downtown core is expanding and the growing intensification of its outer submarkets is causing many traditional tenants to start considering locations outside of the Financial Core.  Not so long ago, many companies, especially financial institutions, were tethered to the King and Bay Street axis.  What we’re seeing today is an increasing willingness by tenants to look at peripheral locations as the downtown core continues to expand to the West, South and now to the East.  Not only do these locations provide a more economical option, there is now a critical mass of transit and amenity options to support the growing office infrastructure and provide the type of live, work and play environments that allows companies to attract top talent.”


On a national basis, declining Downtown office vacancy rates in Vancouver, Ottawa and Halifax helped offset the ongoing weakness in Calgary and Edmonton to leave the national average office vacancy stable at 10.6%.


Toronto once again set a new national record low in industrial availability rates, dropping 30 bps to 3.4%.  As a result, average net rental levels on this traditionally stable asset class have increased 7.9% in a year.  Strong rental growth, combined with limited product available for sale, has seen the average asking sale price per square foot increase by 10.4% in the same period.


“We’re seeing strong uptake of small to mid-size industrial product in the GTA, particularly among owner-occupiers who are increasingly looking to own rather than lease.  Robust demand coupled with limited supply is creating a truly buoyant industrial market.  This strength is not just limited to the GTA, but is spreading across Eastern Canada, which is enjoying the lowest availability rate in a decade.”


Eastern Canada’s industrial market continues to gather pace with availability rates declining in five of the six largest markets and the overall availability rate for the region falling 40 basis points from 5.5% to 5.1%, the lowest since 2006.  



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