2 ND QUARTER 2014
Greater Toronto Area Office Market Report
Partnership. Performance.
GREATER TORONTO AREA HISTORIC OFFICE
MARKET TRENDS
Market Overview
After a poor first quarter, the Greater Toronto Area (GTA) office market
CHANGE IN
TOTAL
TOTAL
spread
M
KK EE TT FF A C T S
MAA RRbetween
experienced higher leasing velocity in the second quarter of 2014,NEWasSUPPLY OCCUPIED
AREA VACANT RATE
AVAILABLE
(%)
RATE (%)
Ava+Vac
occupied area increased in the Downtown, Midtown and Toronto West (YTD) (SQ. FT.)
markets. However, soft conditions prevailed in Toronto East and North as
more space returned to the market than was leased - spoiling
what 3,407,812
would 6,148,725
'00
5.6%
6.8%
1.2%
otherwise have been a positive quarterly result. Class A product
continued
'01
2,879,872
-1,197,220
8.2%
9.9%
1.7%
to benefit at the expense of class B and C buildings in almost'02every district
3,390,524
-1,233,702Financial
11.0%
12.2%
Core overall
availability1.2% Downtown class A buildings with
and node. The second quarter concluded with an overall vacancy
rate550,040
'03
-1,547,390rate vs.12.3%
13.3%
an overall vacancy
rate of1.0% largest contiguous available area
1,841,342
2,848,552
11.5%
1.0%
(physically unoccupied space) of 9.4% - unchanged from the'04 previous
6.5% 12.5%
>=50,000 sf vs. 29 in the suburbs
'05 lease)
1,687,599
3,876,835
10.0%
11.2%
1.2%
quarter - while the overall availability rate (space marketed for
'06
873,913
4,302,979
7.8%
9.9%
2.1%
increased marginally (+10 basis points (bps)) to 12.1%. Sublet
availability
'07
1,794,207
3,204,546
6.8%
8.5%
1.7%
(3.7 msf or 18% of total available space) lingers and is most prominent
in
'08
1,011,293
1,784,179
6.4%
8.5%
2.1%
Downtown Toronto (35% of total GTA sublet available). Construction
is
'09
4,755,533
593,343
8.7%
10.7%
2.0%
steady with 27 buildings (7.3 msf / 58% preleased) underway,'10 of which
5
1,520,727
1,153,346
8.7%
10.6%
1.9%
msf (7 towers / 56% preleased) is scheduled for completion starting
next
'11
2,439,089 Number
of tenants (>10,000
sf)2.1%
Sublet availability rate in class A
1,302,713
7.7%
9.8%
'12
585,343 assessing
quarter, through to 2017.
1,120,254
7.9%options in9.3%
Downtown1.4% buildings in Toronto North vs. 2%
'13
-846,622
2.5%
1,683,952
11.6%
Toronto, 9.1%
representing
over 5.3 msf
one year ago
Toronto’s Downtown market saw a noticeable uptick in leasing
activity,
YTD
2.8%
-388,494
9.4%
12.2%
centred on class A and B buildings along the University Ave.,Q2'14
Bay St.202,606
and
Front St. W. corridors, spanning the Financial Core, Downtown North
Greater Toronto Area
and West nodes. Well-priced large blocks of space either currently
Historic Office Market Trends - All Classes
vacant or soon to be vacated by some of the tenants relocating to new
7,000
14.0%
developments are highly sought after. While transactions were varied as to
industry and size, the banks have been busy, leasing upwards of 300,000
6,000
12.0%
sf during the quarter, and are expected to stay active with several large
5,000
requirements in the works. Though tour activity continued in the new
10.0%
4,000
developments, no deals were inked as the market is set to welcome the
8.0%
3,000
first two of seven towers (RBC Waterpark Place and Bremner Tower) this
fall. Downtown saw its availability (10%, -50 bps) and vacancy (6%, -30 bps)
2,000
6.0%
rates fall during the quarter.
1,000
4.0%
Vacancy in Toronto’s Midtown market declined 20 bps to 6.8%, owing to an
0
increase in leasing activity largely in class B buildings in the Eglinton and
2.0%
-1,000
St. Clair nodes. Workplace strategies undertaken by major space users to
reduce footprints and occupancy costs continue to impact the market. In
0.0%
-2,000
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 YTD
the second quarter, Manulife Financial opted to re-stack its operations at
Q2'14
250 Bloor St. E. - starting in early 2015 and eventually freeing up almost
New Supply
Change In Occupied Area
Vacancy Rate
Availability Rate
202,000 sf, consolidating some staff to its complex at 200 Bloor St. E. As a
result, overall availability in the Bloor node jumped 360 bps between quarters to 8%, while vacancy sits at 4.8%, for now. Manulife’s impending
space rationalization has elevated Midtown’s availability rate 110 bps to 10% - up from 6.5% one year ago.
Turning to the suburban market, Toronto West had another strong showing with the majority of transactions completed in class A product,
leading to declining availability (16.1%, -10 bps) and vacancy (13.7%, -20 bps) during the quarter. Unfortunately, the Toronto East and North
markets experienced a notable rise in availability and vacancy (80 to 100 bps) from the previous quarter. For example, in Toronto East, Imperial
Oil returned more than 172,000 sf to the market at 90 Wynford Dr. in the Don Mills and Eglinton node - the result of ongoing outsourcing and
consolidation. In Toronto North, sublease space has doubled over the past year, largely concentrated in a handful of class A buildings in North
Yonge and Vaughan. Collectively, the suburban market ended the first half of 2014 with higher availability (14.5%) and vacancy (12.7%) rates.
26
82
4.3%
Square Feet (000's)
Total Available/Vacant Rate (%)
11.7%
G G
R ER A
T T
E ER R TTOORROONNTT OO A
A
EA
A RR EE A
Availability Trend
MA
A RR KK EE TT SSUUMMMMAARRY Y
M
Change in
Occupied Area
(000’s of sf)
Vacancy Trend
New Supply
(000’s of sf)
12 months
ago
3 months
ago
Current
Quarter
12 months
ago
3 months
ago
Current
Quarter
Current
Quarter
Year-toDate
Year-to-Date
Completions
Under
Construction
% Pre-Leased
10.5%
12.1%
12.2%
8.6%
9.4%
9.4%
-13
-388
203
7,326
58%
C O M P ACROI MS POA N
L FE AL ES AI SNI N
G G OOPP TT II OONNS S F OF RO TRE NTAENNT SA N
R I SOO FN O
- TG TS A Available Space
G T A
Availability Rate
No. of
Bldgs.
Buildings with more
than 50,000 sf
Buildings with largest
contiguous available area
greater than 50,000 sf
Number of spaces
between 4,000 sf and
8,000 sf
Direct %
Sublet %
Total %
Downtown All Classes
398
41
29
175
8.2
1.8
10.0
Downtown Class A
113
34
26
76
9.0
2.1
11.1
Midtown All Classes
136
8
2
43
8.1
1.9
10.0
Midtown Class A
35
3
1
15
5.2
2.6
7.8
12
128
13.2
1.4
14.6
10
69
14.4
1.5
15.9
4
37
6.1
3.2
9.3
Office Space at Selected
Districts
Toronto East All Classes
302
22
Asking Net Rent Additional Costs
Toronto East Class(Avg.
A $psf)
126(Avg. $psf)
15
Q2-14
Downtown
$
20.53 $
17.94
Toronto North All Classes
107
7
Midtown
$
17.04 $
18.48
Q2-14
East
$A
12.6050 $
13.09
Toronto North Class
7
Sublet
North
$
16.73 $
16.08Available (sq. ft.)
Toronto West All Classes
465 $
38as % of Total Available
Sublet
West
$
14.98
12.74
GTA
Overall
$
15.59
$
14.45
Toronto West Class A
224
24
Total Available
Downtown
Midtown
East 22
North
West
GTA
4
5.9
4.3 Overall 10.2
1,288,925
308,102
416,721
440,323
1,255,275
3,709,346
24
180
16.1
18%
19%
10%
35% 13.1
19% 3.0
18%
15
7,061,316
Downtown Midtown
East
Asking
Net Rent
(Avg.
$psf)
Asking
Net Rent
(Avg.
$psf )
North
11.2
3.5
14.7
6,658,387
20,972,721
1,258,520
GTA - Sublet Availability - All Classes
GTA - Sublet Availability - All Classes
GTA - Occupancy Costs - All Classes
000’s sq. ft.
$p.s.f
GTA - Occupancy Costs - All Classes
$45.00
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
102
4,362,941
1,631,557
West
GTA Overall
40%
35%
30%
25%
20%
15%
10%
5%
0%
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Downtown Midtown
Additional
(Avg.$psf
$psf)
Additional Costs
Costs (Avg.
)
East
Sublet
Available
Sublet
Available(sq.
(sq.ft.)
ft.)
North
West
GTA Overall
Sublet
% of
ofTotal
TotalAvailable
Available
Sublet as
as %
E RR TOONR T
OO
NTO
G R E A TGERRE ATT O
A RA ER EAA SS I GGNNI FI IFCI ACNAT NT TR ATN RS AACNT SI OANCS T I O N S
Address
District
Tenant
Size
277 Front St. W.
Downtown
Metrolinx
93,000 sf
2200 Yonge St.
Midtown
Canadian Tire
28,000 sf
155 Gordon Baker Rd.
Toronto East
Dell Canada
60,000 sf
1124 Finch Ave. W.
Toronto North
Griffin Centre
21,200 sf
80 Courtneypark Dr. W.
Toronto West
Just Energy
48,500 sf
For more information on this report, please contact Avison Young:
Bill Argeropoulos
416.673.4029
Vice President & Director of Research, Canada
avisonyoung.com
© 2014 Avison Young Commercial Real Estate (Ontario) Inc., Brokerage
E. & O.E.: The information contained herein was obtained from sources which we deem
reliable and, while thought to be correct, is not guaranteed by Avison Young.
Acknowledgement: Data for graphs, charts and tables used in this report are sourced from
Avison Young and Altus InSite. Some of the data in this report has been gathered from third
party sources and has not been independently verified by Avison Young. Avison Young
makes no warranties or representations as to the completeness or accuracy thereof.
Avison Young
18 York Street
Suite 400, Mailbox #4
Toronto, ON M5J 2T8
T 416.955.0000 F 416.955.0724