A new report from Avison Young found that the Greater Toronto Area (GTA) office market had a relatively quiet third quarter of 2019 – reflected in lower-than-normal leasing activity and modest absorption levels.
More than 2 million square feet (MSF) was transacted across the region – about half the previous quarter’s leasing volume during Q3. According to Avison Young, this is typical of the summer months when decisions are deferred to the fall and winter, and not an indication of waning demand.
Highlights of the Avison Young GTA Office Market Report (Q3 2019) include:
- Overall absorption was positive 197,000 square feet (sf ), largely owing to the ongoing demand for office space in the downtown and midtown markets.
- GTA-wide availability was up 40 basis points (bps) quarter-over-quarter to 8.9 per cent, while vacancy increased 30 bps to 5.8 per cent.
- An unusual rise in the amount of available sublet space, jumping 371,000 sf between quarters to a two-year high of 2.7 msf – representing 16 per cent of total available space in the market.
- The majority of the GTA’s sublet space is in the suburban Toronto East (31 per cent) and Downtown (29 per cent) markets.
- Toronto’s Downtown market remains tight in terms of both availability (up 30 bps to 4.3 per cent) and vacancy (up 10 bps to 2.2 per cent) as demand continues to outstrip supply, pushing rents higher across all building classes.
- The suburban market had a poor third quarter. Modest gains in occupied office areas in the Toronto East and North markets were offset by notable losses in Toronto West, which has produced solid results of late.
The big news during the quarter in the downtown market was Cadillac Fairview’s purchase of the East Harbour site from First Gulf and its partners for a reported $690 million. The first phase of the development includes the redevelopment of existing Soap Factory building.