Over the past several years, discussions surrounding the housing crisis in Toronto have been at the forefront of attention, with recent events like the announcement of the comprehensive housing package by the Provincial government and the constant flow of new residential developments. However, the commercial development sector is just as influential in the growth of the GTHA, and it—like the residential sector—is just as indicative of the economic and social conditions within the region. A recently released report from CBRE Toronto outlines just how the commercial real estate market in Toronto has been faring in the first quarter of 2017.
The market report from CBRE describes recent influential transactions, current conditions, and characteristics that differ between the downtown and suburbs. In the GTA as a whole, vacancy rates have dropped to 9%, net absorption has dropped to 246,243 sq. ft., and new supply has also dropped to 39,000 sq. ft., all drastically down from the previous quarter. However, 2,972,460 sq. ft. of commercial space is currently under construction and will contribute to future absorption.
New developments in Downtown Toronto have indicated a shift towards commercial properties through significant construction projects such as 16 York and the first phase of the Bay Park Centre—together totalling 2.3 million sq. ft.—which are set to begin construction this year. They indicate the competitiveness and strength of Toronto's commercial real estate market. It should also be noted that both major projects are located within close proximity of Union Station, following the shift in new developments aiming to locate closer to major transit hubs. However, CBRE also reports that the competitive office real estate market impacts small tenants who are unable to access good quality, accessible space because it is being leased privately and not within the open market.
The suburban office market is also showing strong activity as Downtown vacancy rates remain stagnant and transportation improvements increase connections between the suburbs. The suburban vacancy rate dropped to 14.1% and had a positive net absorption rate of 342,693 sq. ft. The December opening of the extension of the Yonge-University Line has also increased development activity in Vaughan, which has seen increased commercial development surrounding the Vaughan Metropolitan Centre Station. The West Region, including Etobicoke, Parts of Old Toronto, the Peel Region and all areas west of that is reported to have seen the highest quarterly absorption since 2009, thanks to transactions from PCL Construction (66,000 sq. ft.) and the Government of Canada (56,000 sq. ft.)
The users of each market gives insight into the types of activities occurring within and around the traditional downtown. As many would expect, nearly half of the central region—including Downtown and Midtown Toronto— is occupied by the financial services sector (46.6%), with technology (10.9%) and business services (10.4%) following. However, the suburban region has a greater share of technology and business services users in its market at 21.5% and 19.6% respectively, and 11.0% is occupied by the life sciences sector—one that is not even within the central region. As there may be many reasons for why this may be, it clearly shows that the suburbs are a key player in the economic activity within the GTHA and will likely see many major commercial developments in the future.