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Outlook: Vacancy Looming for Toronto's Commercial Real Estate

Another year for Toronto's Commercial Real Estate market has began. The year has plenty in store for Canada's biggest city and the seemingly endless construction projects underway.  What does this mean to commercial real estate stakeholders? We take a look brief at 2014 before predicting the 2015 market.


2014 Analysis

The Q4 of 2014 saw a rise in both residential and commercial construction.  According to Colliers Canada, 1.6 million square feet of office space was added to downtown Toronto.


As tenants relocate their operations to modern spaces, landlords are left with a vacancy backfill creating a major concern.  As such, vacant spaces in Toronto's Commercial Real Estate market increased in the downtown area and the suburbs. 


In the core, vacancy increased by 0.4 per cent, while the suburbs saw an increase of 2.1 per cent when compared to 2013 Q4 numbers.  Net Rent also increased by $1.76 for downtown and $0.48 for the suburbs.


Vacandy and Net Rent for Q4 2013/4


Q4 2013

Q4 2014

Vacancy Downtown



Vacancy Suburbs



Net Rent Downtown



Net Rent Suburbs



Source: Colliers Canada




Bay-Adelaide East Bay-Adelaide East is one project that will add more office space downtown.

2015 Outlook

The year 2015 kicked off with 3.5 million square feet still under construction with 66.2 per cent (over 2.3 million square feet) of space preleased.  Landlords loosing tenants due to state-of-the-art office space becoming available, are increasingly looking for international entrants and suburban occupiers to fill their vacancy downtown. 


In addition, property owners have started competing on price to attract new tenants. Since 2011, the direct average asking of rent per square foot (P.S.F.) has increased consistently every year.   It had reached $37.43 in 2014 and grew by an average of $0.72 every year since 2011, amidst a global recession at the time.  


With increased vacancy looming, the P.S.F. may drop as much as $0.25 to $37.18 by 2015 year end. This is just above the 2013 figure of $37.13 at year end.


Even with a growth in vacancy looming, Toronto's Commercial Real Estate market continues its perpetration for expansion and transformation to meet demands in 2015 and beyond.


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This article was written by My Toronto Commercial Real Estate. Toronto's directory for Commercial Real Estate.