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CBRE has released their second quarter update on the Toronto Downtown office market, revealing plenty of activity in the commercial real estate market.
The Financial Core vacancy rate decreased slightly from 6.5% to 6.4% quarter-over-quarter, a few percentage points higher than the low vacancy rate of 4.6% recorded at the end of 2012. Activity in the office market remained fairly robust in the spring but slowed down somewhat heading into the summer. The banks were quite active during the second quarter, with several transactions being completed in the 15,000-60,000 square-foot range, and large financial institutions are looking ahead to their lease expirations in 2017 - 2020, many of whom are considering large block relocations or consolidations. Despite remaining in a 'landlord’s market', select downward pressure on rental rates has been noted, especially in the aging Class “AA” stock as landlords compete to both retain existing tenants and attract new tenants.
Several businesses are now implementing “Alternative Workplace Strategies”, as companies look to reduce their footprints by utilizing space-saving open concept designs, as well as new developments like cloud computing and hoteling strategies. Technology costs for tenants have increased significantly over the past few years as technology platforms become more complex, but these costs are recouped with a decreased footprint, and the accompanying decreased rents.
A collection of new high-rise office properties slated for the downtown core are currently in various stages of planning and approvals, and as these developments compete for anchor tenants, we expect to see plenty more movement in the market in the coming months and years.
