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Toronto Office Market Report (CBRE)

taal said:
No the chart is indeed accurate, but its not negative news for the inner 416 (i.e. the downtown core) as essentially what's happened is construction in the 905 (in more recent years) and the outer 416 (over the last 10 / 20 years) has slowed significantly.

The 905 is deeply tied to the US market (particularly the node around the airport, which is by far the largest), and that's why they suffered a lot more in the recession that the inner 416 did.

But keep in mind, there will be another spike on that chart in about 2/3 years with 5 million square foot of office space coming online in that period (very similar to the spike in 2009), so I don't see the argument; "We're hitting a new 'low'" being very legitimate. Rather I'd argue the boom in the 1980-1990s was rather unprecedented (a lot of this was in the 905).


Given that the US market is rebounding to a certain degree the 905 market has been performing better over the last few quarters, and I think this trend will continue. The more interesting question is what will happen with the inner core, of course given the amount of space under construction it should be expected to see some slow down, that's healthy, but what will the office market look like in 2017 ish will be the telling factor.

A couple other interesting points:
- When I refer to Toronto here I'm essentially referring to the inner core, I honestly consider the rest of the 416 a write off; There has been some speculation that the market may rebound as traffic in the 905 is just so bad and the outer 416 is actually somewhat better, but this hasn't materialized yet.
- Just to emphasis this point, the outer 416 has been losing jobs over the last 20 years or so, generally at a very slow rate but regardless ...

- The inner core will have some competition from new "urban nodes", think along the lines of VCC / Markham Center. Well to be fair I cannot say if this will indeed be competition but that's what time will tell. It may be more likely that the competition will be between NYCC and these new markets, KPMG is a good example, they're moving a lot of their offices around York Mills and Yonge, but will likely retain all presence in the core
Click to expand...

Thanks for the summary, taal. It'll be interesting to see what happens in the future. I truly do think that Toronto's prominence in the globe has risen significantly in the past decade or so. Hopefully, that'll translate to more office jobs in the core.
 
Good to see this growth taking place downtown. I wish other areas along transit (Yonge and Bloor, Yonge and Eglinton, NYCC, SCC, ECC) would follow the lead.
 
I find that in the new internet news age news headlines are becoming more and more sensationalized. In the star article above they are saying vacancy rates will "soar" from 4.7% to 7%. Come on. Someone in commercial real estate correct me if I'm wrong but isn't 7% vacancy in commercial real estate considered at worst neutral and perhaps even slightly a landlord's market?

If vacancy rates only peak out at 7% after this building boom (I feel they may end up much higher) wouldn't that make it one of the tightest rental markets post building boom in the cities' history? Again correct me if I'm wrong but isn't a typical post boom vacancy rate more in the order of 15% ?
 
There is no 'typical' post boom vacancy rate ... but yes the article is silly. The prediction last "boom" was 12% vacancy, and it never materialized, rather vac any rates fell !

The one thing not in our favor this time around though is leasing activity has definitely slowed, so its more likely we won't see a repeat of the last boom, but too what levels who knows.

The extent of this boom is pretty unprecedented:
Downtown #Toronto 5,850,783 sqf office space u/c complete by 2017 - largest boom since late 80s & most construction in NA except NYC
Click to expand...
 
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