The Toronto North and East office markets finished Q3 on a positive note, with healthy gains in occupied office area, resulting in slightly lower availability and vacancy rates.
According to Avison Young’s Q3 Toronto North & East Office Market Report, with record-low availability and vacancy and continued upward pressure on rental rates in downtown Toronto, the suburban Toronto North and East office markets remain a bargain.
Some landlords fear losing tenants to downtown, but these markets continue to secure their share of leasing transactions. Here are some other report highlights:
- Following a poor Q2, the Toronto North market saw occupancy levels rise by 106,000 square feet in Q3, with class A buildings accounting for most of the tenant demand.
- Overall availability declined quarter-over-quarter to 9.8 per cent, similar to one year ago. Overall vacancy is currently at 6.2 per cent.
- The market’s overall performance continues to be dictated by the established North Yonge node, which has seen an uptick in availability (13 per cent) and vacancy (7.5 per cent) in recent quarters and currently houses the market’s large-block opportunities
- The emerging Vaughan office displays much lower availability (4.6 percent) and vacancy (4 per cent) rates, despite an active development pipeline. Three buildings remain under construction in Toronto North, all of which are in Vaughan, and will add approximately 306,000 square feet to the market upon completion. North Yonge remains an attractive location, securing its share of lease transactions.
- In Toronto East, gains in occupied area, predominantly in class A buildings in the Highway 404 and Highway 407 office node, offsetlosses in class B buildings in the Scarborough node, leaving the
market on the positive side of the ledger. Toronto East is home to two of thelarger blocks of contiguous available space, including the former Aviva head office
- Planning efforts are in effect to revitalize the Consumers Road office park by providing a mix of uses, amenities, and transportation options with the adoption of a secondary plan expected in early 2018. Consumers Road has more than 18,000 employees working in more than 600 businesses (the majority office based), making it one of the largest concentrations of office workers outside of downtown Toronto. These improvements should enhance the location for current and future tenants alike, perhaps kick-starting new office development, which has not been seen in the node since the late 1980s.
- The North and East markets also remain attractive from an investment perspective. Notable Q3 office building sales included: Adgar Investments and Montez Corporation partnering to purchase 2001 & 2005 Sheppard Ave. E. from Redbourne for $76.1 million, Morguard Investments acquiring 123 Commerce Valley Dr. E. from Triovest Realty Advisors for $66.5 million, while Crown Realty Partners purchased a 50 per cent interest in YongeNorton Centre from Investors Group for $24.5 million.