toronto average

Toronto’s office and industrial markets continue to strengthen and the city has emerged as one of the best performing commercial real estate markets in North America. According to the results of CBRE Limited’s National Office and Industrial Second Quarter 2016 Statistical Summary, vacancy in the Toronto office market has dipped below 5%, falling 40 basis points (bps) from Q1 2016 to 4.9%. As a result, Toronto has the lowest downtown vacancy rate in a major North American market. In addition, its industrial market has the third lowest availability rate in North America, with Vancouver having the second, reflecting the wider growing momentum in Canada’s overall industrial market.

“Toronto continues to demonstrate remarkable strength and is becoming a stand-out market not only in Canada, but globally. Downtown vacancy rates have been on a downward trend since 2013 despite almost 4 million sq. ft. of new supply delivered in the same time frame. The driving force behind this downward trend is robust tenant demand which has allowed for a refresh of the downtown’s traditional tenant base. With big block tenants moving from older Class A buildings into new builds, room has opened up for firms who want to be located downtown in order to attract and retain the best talent,” commented Paul Morassutti, Executive Managing Director for CBRE Limited.

Approximately 4.4 million sq. ft. has been leased in new build downtown offices in the current 20142017 construction cycle. Of this amount, 4.0 million sq. ft of space has already been, or is set to be, given back to landlords. However, “landlords have been extremely proactive in working with tenants’ requirements to backfill this space. Approximately 45% of this space has already been leased up, which is ahead of our projected timeline. It again speaks to solid demand from tenants for downtown locations and provides evidence that Toronto’s supply and demand balance is in firmly in check.

“Many commentators were quick to label Toronto’s office market as over-supplied and point to the 2.9 million sq. ft. of new builds currently under construction as evidence. However, this represents only 3.4% of the total downtown inventory, which is extremely modest, particularly when compared to other leading North American markets. Add in a stellar industrial sector and you have a market that is demonstrating the kind of strength that, in this time of global economic and geopolitical uncertainty, few can match,” added Morassutti.

Availability rates continue to decline in Canada’s major industrial markets with Vancouver overtaking Toronto for the first time in eight years to have the lowest availability rate in the country. Availability dropped 50 bps in Vancouver during Q2 2016 to 3.6%, the lowest availability rate since Q2 2008, which is the third lowest in major North American markets and was only bettered by Orange County. Availability declined 20 bps in Toronto to 3.7%, breaking the record low it the set in the previous quarter. As a result of the declining availability, average net rents have increased in Vancouver and Toronto by 6.9% and 4.9% respectively over the last 12 months, making industrial one of the best performing asset classes.

“Strong demand, coupled with relatively low levels of new supply, have created truly buoyant industrial markets in Toronto and Vancouver. Particularly in Vancouver, which has seen availability rates drop by half in the last 12 months alone. However, this momentum is not just limited to Toronto and Vancouver alone as the wider industrial market in Canada is gathering steam. There is always a lag before a low loonie begins to positively impact industrial activity, but we are now seeing it have a demonstrable impact on our manufacturing industry. Capital expenditure on machinery and equipment, transportation and warehousing are all growing and we’ve seen availability rates come down rapidly over the last year in South-West Ontario as its manufacturing sector improves,” added Morassutti.

Availability has declined 160bps in the London industrial market over the last year and is at the lowest point in almost 10 years.

Source: CBRE

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