Leasing of industrial, commercial/retail and office space dropped seven per cent on a year-over-year basis in the second quarter of 2013. According to the Toronto Real Estate Board (TREB) commercial division, more than 5.1 million square feet was leased through the Toronto MLS system in that time.

Industrial space made up slightly more than 75 per cent of the total leasing activity in the quarter, at approximately 3.9 million square feet.

Changes in average lease rates reported for transactions undertaken on a per square foot net basis were mixed. The average industrial lease rate was down slightly on a year-over-year basis. Average lease rates for commercial/retail and office space were up over the same period.

The industrial leasing market in the Greater Toronto Area (GTA) is driven by exports, particularly the production of goods and services destined for the U.S., says TREB commercial division chair, Cynthia Lai. There was an uptick in exports in the first quarter of 2013, maintaining the expectation that exports will continue to climb.

“The commercial/retail and office markets performed well, with growth in the amount of leased space in the second quarter. This increased demand appears to have translated into tighter market conditions and growth in average lease rates,” she says.

The total number of sales for industrial, commercial/retail and office properties through the Toronto MLS system in the second quarter was up by 10 per cent year-over-year to 352. Over the same period, average selling prices per square foot were down for industrial and office properties and up for commercial/retail properties.

“Given that growth in business investment is expected to continue this year and next, it is reasonable to assume purchases of industrial, commercial/retail and office properties will also increase, as businesses look to increase space and investors seek to take advantage of quality returns,” says Lai.