TORONTO-In contrast to the short backward slide of the US market, Toronto’s office space actually saw a drop in vacancy in the third quarter 2010 to less than 10%, which hasn’t been seen since early 2009. The lease-up of four new office towers to about 10% vacancy helped the market, though Avison & Young experts say the focus is now on large blocks available in former bank buildings downtown.
Bill Argeropoulos, VP and director of Canada research for the company, says the movement seen but not proven in the second quarter finally came to roost in the third, with close to 2.5 million square feet of transactions, 70% being renewals and expansions, and 30% relocations. However, he tells GlobeSt.com that the 9.7% vacancy isn’t too wonderful, as space that’s currently occupied but being marketed boosts the potential vacancy to 11.6%. “It’s likely foreshadowing, the vacancy figure will probably tick up higher and peak in 2011 before it begins to retreat,” he says.
He says four of the five new office towers downtown are now 90% occupied, including Bay-Adelaide Centre West, Telus Tower, RBC Centre and Maple Leave Square. Only 18 York St. is still under construction, “and that building is largely leased, only one floor available, and it should be delivered in the latter half of 2011,” Argeropoulos says. There are 11 full floors available in these developments, with the largest contiguous block being 80,000 square feet.
Now, it’s the older large bank buildings in the city’s financial core that are at risk of losing tenants. “If you look at the four towers there, there’s more than 200,000 square feet available, a result of tenants vacating for the new buildings or other properties,” Argeropoulos says. “They’re at 16% vacant, a glut in that district that I’ve not seen in my 22 years in the business.”
These older structures include Commerce Court West, Royal Trust Tower, First Canadian Place and TD Bank Center. Argeropoulos says renovation projects have begun for the properties, especially at the Brookfield-owned First Canadian, where the company is in the process of re-skinning the 72-story, 2.4-million-square-foot building, now about 17% vacant.
Similar to the US market, the Toronto trophy office market is starting to narrow, he says. “It’s getting so that large-block users, and/or tenants who want a LEED-certified space, may have to wait another three-to-four years. There isn’t a developer who is going to go into the ground on a speculative basis unless there’s a willing lead tenant,” he says.
Categories: International, Office, Leasing, Canada
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