A Colliers International research report shows a growing demand towards ‘Office Condos’ among business owners in the City of Toronto and Metro Vancouver, as they discover that owning your office space can be more affordable than leasing.
The Colliers Office Condo Report shows that in Vancouver, the demand continues to surge for investors and end users alike due to several variables, including low interest rates, strong price-per-square-foot growth, increasing lease rates, and opportunity to build equity.
In 2010, only 31 per cent of office condo buyers in Vancouver were investors, a figure that grew to a staggering 83 per cent by 2014. This increase in demand is also driven by the affordability and opportunity to own real estate (when compared to leasing) as an investment that can be leased upon purchase. Using an example in a market with $35 per square foot lease rates, against an office condo unit selling at $700 per square foot, the owner’s mortgage cost provides a savings of $3 per square foot. (Note: this is assuming a 3 per cent mortgage with 20 per cent down and amortized over 25 years).
In the City of Toronto, the demand for office condos is typically from end users, such as professional service firms, or local or international investors seeking a stable, solid and predictable cash flow. In 2015, 74 per cent of the office condo sales were to end users, with 26 per cent to investors.
The Central North Market of the GTA has the most activity, recording 56 per cent of office condo sales in 2015 and offering 43 per cent of availability.