group of the bank's employees, with fellow tenants Cisco Systems Canada and ... roster, which includes Marsh Canada, SNC
3 RD QUARTER 2014
Greater Toronto Area Office Market Report Partnership. Performance.
GREATER TORONTO AREA HISTORIC OFFICE MARKET TRENDS
TOTAL TOTAL spread Following a sub-par second quarter, which left the Greater Toronto Area (GTA) CHANGE IN NEW SUPPLY OCCUPIED AREA VACANT RATE AVAILABLE between M ARRAva+Vac M KK EE TT (%) (YTD) (SQ. FT.) RATE (%)A office market in negative territory, the third quarter saw occupancy levels begin to benefit from the myriad of lease transactions completed over the past several quarters. Class A product remained in high demand, driven by the flight 6,148,725 '00 3,407,812 5.6% 6.8% 1.2% to quality in both existing and newly delivered buildings, while geographically, '01 2,879,872 -1,197,220 8.2% 9.9% 1.7% -1,233,702 11.0% 12.2% 1.2% the Downtown and Midtown markets once again outpaced the'02suburbs.3,390,524 The 550,040 -1,547,390 13.3% Millions 12.3% of square feet delivered 1.0% in GTA finished the third quarter of 2014 with an overall availability'03rate (space '04 1,841,342 2,848,552 11.5% 12.5% 1.0% Downtown South since 2009 – 45% marketed for lease) of 12% (-20 basis points (bps)), while the vacancy rate '05 1,687,599 3,876,835 of total 10.0% new supply11.2% Downtown1.2% (physically unoccupied space) edged slightly higher to 9.5% (+10 bps). On the '06 873,913 4,302,979 7.8% 9.9% 2.1% development front, six buildings comprising 1.2 million square feet (msf)1,794,207 (73% 3,204,546 '07 6.8% 8.5% 1.7% leased) were completed during the quarter, bringing the year-to-date tally '08 1,011,293 1,784,179 6.4% 8.5% 2.1% to 10 buildings and 1.4 msf. This compares with 752,000 square '09 feet (sf) (45% 4,755,533 593,343 8.7% 10.7% 2.0% 1,520,727in 1,153,346 8.7% 10.6% 1.9% leased) spread across the same number of buildings during the '10 same period 2,439,089 2.1% 1,302,713 7.7% Millions of square feet9.8% of proposed 2013. A further 6.4 msf is under construction (55% preleased), of'11which 1.1 msf '12 585,343 development 1,120,254 7.9% 9.3% Downtown – 77%1.4% is scheduled for delivery in 2014. The remainder will be delivered over the next '13 -846,622 1,683,952 9.1% the Financial 11.6% Core 2.5% outside three years: 2015 (1.5 msf), 2016 (2.6 msf) and 2017 (1.2 msf).
FF A C T S
3
43 Number of suburban class A buildings with more than 50,000 sf available – 60% in Toronto West
11+
YTD
Q3'14 1,365,206of Leasing activity remained steady in downtown Toronto and while two-thirds the market’s nearly 400 buildings saw no change in occupied area -during the quarter, the growth that occurred was widely distributed across 100 buildings. The most notable increases were in class A buildings in the Financial Core and Downtown South nodes, and class B in the King & Dufferin node. Downtownwide availability dipped below 10% to close the third quarter at 9.8%, while as expected, the vacancy rate increased 50 bps to 6.5%, due to new supply in Downtown South. Oxford Properties’ RBC WaterPark Place welcomed the initial group of the bank’s employees, with fellow tenants Cisco Systems Canada and Canada Newswire to follow in 2015. GWL Realty Advisors’ Bremner Tower will be completed next quarter, having recently added AIG (55,000 sf) to its tenant roster, which includes Marsh Canada, SNC-Lavalin and Apple Canada, with another sizeable transaction in the offing. As a result, AIG will make 114,000 sf available for lease at 145 Wellington St. W. The Midtown market saw modest growth in the third quarter, led once again by class B buildings in the Eglinton and St. Clair nodes. Midtown availability and vacancy rates retreated from the second quarter, falling 80 and 90 bps to 9.2% and 5.9%, respectively. From a vacancy perspective, tight market conditions prevail in the Bloor and St. Clair nodes, with rates 100 bps below the Midtown average and half that of Eglinton.
380,256
9.5%
4% GTA under construction as a percentage of existing inventory vs. almost 6% for Downtown
2.5%
12.0%
Greater Toronto Area Historic Office Market Trends - All Classes 14.0%
7,000
Square Feet (000's)
6,000
12.0%
5,000 10.0%
4,000 3,000
8.0%
2,000
6.0%
1,000
Total Available/Vacant Rate (%)
Market Overview
4.0%
0 2.0%
-1,000 -2,000
0.0% '00
'01
'02
'03
New Supply
'04
'05
'06
'07
'08
Change In Occupied Area
'09
'10
'11
Vacancy Rate
'12
'13
YTD Q3'14
Availability Rate
Countering the perceived migration of tenants to downtown, suburban landlords continue to deliver a steady flow of built-to-suit projects, including headquarters for Sobeys Canada by Metrus Properties and for TJX Canada by Orlando Corporation, as well as First Gulf’s recent speculative offering – First Meadowvale Corporate Centre III. More than 776,000 sf has been delivered during the past year with an additional 2.3 msf underway, two thirds of which is spread across seven of Toronto West’s 17 nodes. Heartland (29%) and Meadowvale (18%) are the hottest development markets – highlighting Toronto West’s enduring appeal for new development. However, there remains an imbalance between demand and new supply across the suburban markets (North, East and West) – which collectively display double-digit availability (14.3% / -20 bps) and vacancy (12.7%) rates. In all, the GTA market is expected to remain active through the end of 2014 and into 2015, with ample urban and suburban options for tenants at various price points. G G R ER A T T E ER R TTOORROONNTT OO A A EA A RR EE A Availability Trend
MA A RR KK EE TT SSUUMMMMAARRY Y M
Change in Occupied Area (000’s of sf)
Vacancy Trend
New Supply (000’s of sf)
12 months ago
3 months ago
Current Quarter
12 months ago
3 months ago
Current Quarter
Current Quarter
Year-toDate
Year-to-Date Completions
Under Construction
% Pre-Leased
11.4%
12.2%
12.0%
8.8%
9.4%
9.5%
648
380
1,365
6,396
55%
C O M P ACROI MS POA N L FE AL ES AI SNI N G G OOPP TT II OONNS S F OF RO TRE NTAENNT SA N R I SOO FN O - TG TS A Available Space
G T A
Availability Rate
No. of Bldgs.
Buildings with more than 50,000 sf
Buildings with largest contiguous available area greater than 50,000 sf
Number of spaces between 4,000 sf and 8,000 sf
Direct %
Sublet %
Total %
Downtown All Classes
399
40
26
179
8.4
1.4
9.8
Downtown Class A
114
35
25
76
9.6
1.5
11.1
Midtown All Classes
135
7
3
41
7.5
1.7
9.2
Midtown Class A
35
2
1
15
4.7
2.7
7.4
13
125
12.9
1.1
14.0
11
71
14.3
1.2
15.5
2
40
5.6
2.3
7.9
Office Space at Selected Districts
Toronto East All Classes 303 21 Asking Net Rent Additional Costs Toronto East Class(Avg. A $psf) 126 14 (Avg. $psf) Q3-14 Downtown $ 20.29 $ 17.35 Toronto North All Classes 110 3 Midtown $ 16.91 $ 18.19 Q3-14 East $ A 12.9051$ 13.153 Toronto North Class Sublet North $ 16.40 $ 16.45 Available (sq. ft.) Sublet Toronto West All Classes West $ 15.07468$ 12.8042as % of Total Available
GTA Overall $A Toronto West Class
15.56227$
14.35 Total 26 Available
Downtown Midtown East North West GTA Overall 2 27 5.2 2.8 8.0 1,036,815 278,179 332,252 306,204 1,105,127 3,058,577 15% 19% 28% 13.9 16% 2.7 15% 27 1858% 16.6 17 7,022,659
GTA - Occupancy Costs - All Classes
12.26,931,600 2.7 20,734,79014.9
1,075,091
GTA - Sublet Availability - All Classes
GTA - Sublet Availability - All Classes
GTA - Occupancy Costs - All Classes
$40.00
3,500
30%
$35.00
3,000
$30.00
25%
2,500
000’s sq. ft.
$p.s.f.
100 4,209,098
1,496,342
$25.00 $20.00 $15.00 $10.00
20%
2,000
15%
1,500
10%
1,000
5%
500
$5.00
0
$0.00 Downtown
Midtown
East
Asking Net Rent (Avg. $psf )
Asking Net Rent (Avg. $psf)
North
West
0% Downtown Midtown
GTA Overall
Additional Costs (Avg. $psf )
East
Sublet Available (sq. ft.)
Sublet Available (sq. ft.)
Additional Costs (Avg. $psf)
North
West
GTA Overall
Sublet as % of Total Available
Sublet as % of Total Available
E RR TOONR T OO NTO G R E A TGERRE ATT O A RA ER EAA SS I GGNNI FI IFCI ACNAT NT TR ATN RS AACNT SI OANCS T I O N S Address
District
Tenant
Size
150 York St.
Downtown
MedCan
66,000 sf
2 Bloor St. E.
Midtown
Bain & Company
26,500 sf
105 Gordon Baker Rd.
Toronto East
Grey Power Insurance
37,000 sf
5160 Yonge St.
Toronto North
Financial Services Commission of Ont.
114,000 sf
199 County Court Blvd.
Toronto West
CCAC-Central West
39,300 sf
For more information on this report, please contact Avison Young:
Bill Argeropoulos
416.673.4029
Vice President & Director of Research, Canada
avisonyoung.com © 2014 Avison Young Commercial Real Estate (Ontario) Inc., Brokerage E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young. Acknowledgement: Data for graphs, charts and tables used in this report are sourced from Avison Young and Altus InSite. Some of the data in this report has been gathered from third party sources and has not been independently verified by Avison Young. Avison Young makes no warranties or representations as to the completeness or accuracy thereof.
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