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The Toronto Real Estate Board (TREB) has just released its figures for a year-by-year breakdown of commercial transactions in February 2017 compared to those of February 2016. Last month, just under 272,000 square feet of commercial retail, office, and industrial space was leased from TREB's MLS® system, totalling 57 transactions. Compared to February 2016—when 362,720 ft² of space was leased out—a drop of 25 per cent was recorded.
While this may appear puzzling due to recent reports on Toronto's hot commercial market in the urban core, TREB notes that this decline "was driven entirely by the industrial segment, where the amount of space leased was down substantially compared to last year." By contrast, the "amount of commercial/retail and office space leased was up on a year-over-year basis."
In February 2016, the industrial market saw 280,517 ft² of space leased, whereas 142,402 ft² was leased this year, representing a -49.2% change. The number of transactions between the two years have also dropped, as only 10 were made this year, compared to 17 in 2016.
The Commercial market had a strong follow-up to last year. A 68.8 per cent increase from last year accounted for 90,332 ft² of leased space, up from 53,516 ft² in 2016. Despite the average sale price per square foot dropping, 9 more transactions were made this past February when compared to last February.
The Office market also grew in volume, seeing an increase of over 10,000 ft², rising to 39,183 ft², compared to the 28,687 ft² of space leased last year. While the number of transactions remained the same, there was a 26 per cent increase in the average sale price.
In a response to the year-by-year figures, TREB President Larry Cerqua argued that "[t]he outlook for Canadian economic growth is positive. However, there does remain some concern surrounding the revival of exports, which obviously could impact some economic segments in the GTA and southern Ontario more broadly. The evolving economic trends over the next few months will be key in firm's decisions to take on more space."
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Meanwhile, the latest market report by CBRE has stated that the industrial market is experiencing 5.1 million ft² of space currently under construction throughout the Greater Toronto Area. 70 per cent of that number is being built on speculation; meaning no tenants have signed on yet. In the midst of record-low vacancy rates, the shortage of developable land for new industrial space has been putting pressure on land prices, exceeding $700,000 per acre.
As Downtown Toronto has the lowest office vacancy rate in North America, the report by CBRE suggests that we can expect at the very least, one major office tower to break ground. This would likely be in either King West or near the Waterfront, as many of these projects are approved and await more tenant signings.
