Canada’s largest office market cooled slightly in the opening quarter of 2013.

Losses outpaced gains in the Greater Toronto Area (GTA) office sector, leaving the leasing market’s overall performance in the red. Space was returned to the market, causing a modest rise in vacancy levels in some submarkets and building classes across the sprawling region’s 170 million square feet.

“Despite the less than stellar performance turned in by the GTA office leasing market to start 2013, we really should consider ourselves fortunate that we are not still climbing out of a recessionary trough,” says Bill Argeropoulos, vice-president and director of Canadian research at Avison Young. “One or two negative quarters spread among a string of positive quarterly results over the past couple of years is not alarming.”

According to Avison Young’s first quarter 2013 GTA office market report, the overall vacancy rate (physically unoccupied space) for Class A, B and C office space increased a modest 10 basis point from year-end 2012 to close the first quarter of 2013 at 8.1 per cent. The overall availability rate, which includes space being marketed for lease, increased a similar amount and rests 140 basis points higher at 9.5 per cent. Notwithstanding the nominal increase, vacancy and availability remain 30 and 20 basis points lower, respectively, than during the same quarter one year ago.

Of the scores of construction cranes that dot the Toronto skyline, most are engaged in highrise residential projects. However, amid this development there is also vibrant office construction, with 26 projects underway comprising 6.2 million square feet, of which 47 per cent is preleased. The overwhelming majority (4.4 million square feet or 71 per cent, with 45 per cent preleased) is located downtown.