Toronto, Canada’s largest city and commercial real estate market, remains one of the healthiest in North America, according to a recent market report by Avison Young.

With an office stock of approximately 170 million square feet, the vacancy rate across all building classes in the Greater Toronto Area (GTA) finished the fourth quarter of 2012 at eight per cent. Although down a marginal 10 basis points from the previous quarter, vacancy climbed 40 basis points during the year, largely due to the steady delivery of new office supply, not the lack of demand. Sitting 140 basis points higher, the overall availability rate (space market for lease) increased 20 basis points between quarters to end the year at 9.4 per cent.

As has been the case for much of the year, Class A continued to attract users, largely at the expense of Class B and, to a lesser degree, Class C buildings. To close the year, downtown outspaced midtown, while Toronto “west” remains the catalyst for much of the growth experienced in the suburbs overall.

Toronto’s downtown market continues to tighten, the report says, as the vacancy rate fell for the tenth consecutive quarter to conclude 2012 at 4.7 per cent, equalling the year-end mark of 2008. Occupancy levels increased across all building classes, resulting from a combination of tenant relocations and/or expansions. Tenant retention remains paramount amongst landlords in the wake of the nearly 5.4 million square feet of new office development already announced (or soon to be announced) and under construction, with the bulk of the supply coming on stream between 2014 and 2017.