Avison Young releases its First Quarter 2016 GTA Office Market Report
TORONTO, April 12, 2016 /CNW/ - The Greater Toronto Area (GTA) office leasing market started 2016 the way it ended 2015 – on a positive note. Renewals, expansions and relocations continue to characterize leasing activity in both existing and new product across the region with almost 3 million square feet (msf) of deals concluded during the first quarter of 2016. That activity, along with lease transactions completed in 2015, translated into the fourth successive quarter of positive absorption, mainly in class A buildings.
These are some of the key trends noted in Avison Young's First Quarter 2016 Greater Toronto Area Office Market Report, released today.
According to the report, the overall GTA office availability rate increased 40 basis points (bps) from year-end 2015 to close the first quarter of 2016 at 11.7%, while vacancy held steady at 9.8%. New supply delivered to the market was limited to downtown Toronto as Brookfield Office Properties' 1.1-msf Bay-Adelaide Centre–East Tower was completed – and is gradually being occupied by lead tenant Deloitte. The majority of the 4.4 msf currently under construction GTA-wide is scheduled for completion by year-end 2017.
"It's hard to believe that the pace of development may actually be slowing down, given the torrid rate at which the Toronto skyline has been transformed during the past decade, especially since 2009," comments Bill Argeropoulos, Principal and Practice Leader, Research (Canada) for Avison Young.
Argeropoulos continues: "While marketing efforts are ongoing, the next wave of large developments in downtown Toronto will not likely begin to deliver product before 2020-21. However, construction on a smaller scale is imminent as developers aim to bridge the gap between cycles. Residual blocks of backfill space resulting from new developments will continue to provide options during the construction lull, but are consistently being leased up."
The report goes on to say that, while the market's good fortune continues to be driven by robust leasing downtown, the suburbs collectively had a strong showing in the first quarter of 2016, following an uneventful performance in 2015. Despite the positive results, suburban availability inched higher (14.5%, +20 bps), while vacancy edged lower (13.3%, -40 bps).
Argeropoulos adds: "Without over-generalizing, landlords with significant lingering vacancy, especially in soft markets, are sweetening the pot for brokers and tenants by offering more commissions, moving allowances for specific length of term, and below-market starting rental rates in return for a specified lease commencement date."
He concludes: "Looking ahead to the remainder of the year, the GTA's prospects appear promising. In addition to the organic growth taking place in the financial and IT sectors, we expect the strong U.S. dollar to encourage U.S.-based firms to expand their presence here, leveraging the favourable exchange rate to hire skilled Canadian staff. Furthermore, the emphasis on infrastructure investment in the recently released federal budget will more than likely result in job growth and spur demand from the industries that benefit from these projects."
Avison Young is the world's fastest growing commercial real estate services firm. Headquartered in Toronto, Canada, Avison Young is a collaborative, global firm owned and operated by its Principals. Founded in 1978, the company comprises 2,200 real estate professionals in 77 offices, providing value-added, client-centric investment sales, advisory, management, financing and mortgage placement services to owners and occupiers of office, retail, industrial and multi-family properties.
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