The Greater Toronto Area’s commercial real estate sector dipped approximately 20 per cent last month in comparison to May 2012, according to the Toronto Real Estate Board.
Reports from the board reveal 449,649 square feet of industrial, commercial/retail and office space was leased through its Multiple Listing Service system in May 2013. This result was based on space leased on a per square foot net basis with pricing disclosed.
The average lease rate for industrial transactions, which accounted for approximately three-quarters of total leased space, was $5.26 per square foot net. This represented an increase of 4.7 per cent compared to May 2012.
“Average industrial lease rates have increased quite strongly on a year-over-year basis so far this year and May was no exception,” says the board’s commercial division chair, Cynthia Lai. “The trend for industrial lease rates seems to have followed growth in related sectors of the economy.”
There were a combined 60 industrial, commercial/retail and office sales in May 2013, down from 76 transactions in May 2012. The change in the average selling price per square foot varied by property type. The average industrial selling price was down on a year-over-year basis, whereas the average commercial/retail and office selling prices were up.
The decline in the average industrial price was due largely to a change in the geographical location of large industrial transactions this year compared to last.
Some of the average commercial/retail and office selling price increases were likely due to tighter market conditions in some segments but there was also a compositional component to the reported price growth as well. For example, the average selling price for office properties in May was influenced by the fact that no large office properties changed hands through the system this year, which contributed to the increase in the average selling price. Larger office properties tend to sell for less on a per square foot basis.
“The pace of economic growth, especially as it relates to exports and business investment, is expected to increase through 2013.” (So) it is reasonable to assume that the pace of commercial transactions will strengthen moving forward as well,” says Lai.
