Tenants searching for higher-quality office buildings are driving development in Toronto West neighbourhoods, such as Meadowvale.
With more than 260 square feet currently under construction, including Meadowpine Boulevard, First Meadowvale Centre—Phase III and 7080 Derrycrest Drive, landlords and developers are trying to keep up with demand.
However, this key trend, noted in Avison Young’s Q3 2014 Toronto West Office Market Report, also highlights rising vacancy rates to contend with. While Meadowvale is booming, there remains an 11.6 per cent vacancy in this area.
“The interesting question from a market perspective becomes: Who will pick up class B and C product these high-profile tenants leave in pursuit of greener pastures,” asks Joe Almeida, principal at Avison Young. “And how will these lulls in occupancy affect the market in the long term?”
Almeida thinks tenants looking for less expensive space or short-term lengths will help fill this flood of empty space.
Looking ahead, the future of Toronto West is believed to hinge on the effort of municipal governments to pursue new mixed-use community developments and public transit.
At the moment, regions such as Meadowvale and Oakville are market stars for a few reasons.
Jeff Flemington, principal at Avison Young, says Meadowvale’s lower rates on newer product and generous land and space options trump places like Mississauga’s congested central business district.
“Growth in the surrounding areas—such as northwest Mississauga, Brampton, Georgetown and Milton, —is pouring over into the Meadowvale area, possibly accounting for the spikes in development that we’re seeing right now,” says Flemington, adding, “location appears to be the key reason for its success.”
At the same time, major developers are building substantial properties in Oakville, such as Carttera Management’s Oakwoods Centre and Business Park, which will reinforce an area already appeasing trends towards quality.
“In addition to Oakville benefitting from an excellent location, developers are succeeding in this node because they’re capitalizing on market trends focused on the highest LEED certifications and sustainability while offering flexible space that can suit a variety of tenants,” Flemington notes. “It is for these reasons Oakville will likely be a source of stability for the foreseeable future.