Office Real Estate News
D.J. McGauley is a dedicated team of professionals providing Design and Space Planning, Renovation, Relocation and Facilities Management services to our clients. Based in Toronto, we provide the same excellent professional and personalized service, whether office relocation is down the street or across the GTA. We work with both small and mid-sized companies to save time and money, as well as enjoy a stress-free corporate transition or corporate renovations experience.
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Our project management team handles all the details from design to permitting, tendering and construction management. Whether your doing a small reno or a full build out, our experienced team will work with you, building management and trades to ensure your ideas come to reality on time and on budget. We take care of the details while allowing you to focus on your business.
At the risk of stating the obvious, the plummeting oil prices in our economy today has had quite an effect in the office real estate industry. Many industrial companies across Canada that are highly dependant on oil have contracted their operations in efforts to slash their costs, giving up valuable assets, including office space. This has led to increased office space vacancies across the country which owners are fighting to not sell or lease out below their market value. Meanwhile, some trust companies are selling off their assets in order to have more liquid funds. Their goal– to purchase properties that they foresee being quite profitable once the market changes. But with all this fluctuation and activity, I dare ask, is there a light at the end of the tunnel for the current office space market?
Well, market history dictates that what goes down eventually goes back up again. In 2008, a global recession caused oil prices to drop to $40 per barrel after being peaked at over $150 per barrel between 2000-2008. Then economic recovery efforts between 2009 and 2014 brought the oil prices back up to $125 per barrel1. Oil prices have steadily gone downwards since 2014 but fluctuating world demand and supply could change that in the foreseeable future. In direct relation, the office vacancy rates have increased from 8% in 2012 to over 18% in 2016, but could go down again once demand and thus pricing for oil goes back on the rise.
In the meantime, there is the possibility of foreign interest. With the low oil prices and lower Canadian dollar value, foreign investors, particularly from Asia, are showing interest in Canada’s available office space. In fact, four of the past five purchases of major downtown office space in Canada have been to foreign buyers who have been flocking to the relative safety of the country’s hottest real estate markets, Toronto and Vancouver2.
So, is there hope for the office space market? With oil prices slowly on the rise and with increased foreign interest in Canada’s available office spaces, I would say that there is.
DJ Mcgauley and Associates Inc. is your Office Space Planning, Renovations and Relocation Project Management Company of Choice for the Toronto, GTA and surrounding areas. If a renovation or relocation of your 2,000 – 25,000 sq.ft. office space is in your plans, contact us to arrange a no-obligation site meeting. We guarantee that by the end of that meeting, you will know all that would be required to make your office renovation/relocation project a successful reality.
1Peresio, Greg, Investopedia, “Why did Oil Prices Drop so Much in 2014?”, http://www.investopedia.com/ask/answers/030315/why-did-oil-prices-drop-so-much-2014.asp
McLean, Steve, Property Biz Canada, 2016-02-28, “Firm Capital Property Trust Ready to Buy”, http://renx.ca/firm-capital-property-trust-ready-to-buy/
2McMahon, Tasmin, Report on Business, 2016 02 23, “Office Real Estate Sectors Settling in for a Tough 2016”, http://www.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/office-retail-real-estate-sectors-settling-in-for-tough-2016/article28858197/
TD Economics, Special Report, July 12, 2012, “Canada’s Commercial Real Estate Markets Primed for Growth”, https://www.td.com/document/PDF/economics/special/sg0712_commercial.pdf
Earlier this year, the demand for office space in the Canadian market was on the rise particularly in the major city centers. Local REITs have seen it and have responded…differently.
Allied Properties REIT and Dream Office REIT are the two main REIT companies in Canada whose portfolios primarily contain office spaces for rent or lease. In the nine months ending September 30, 2014, Allied Properties REIT had invested $210 million in acquisitions of seven properties with 568,000 square feet of GLA (gross leasable area) and 553 parking spaces, and another $15 million in 460 King Street West in Toronto, all of which are now part of its rental portfolio. In that same period, Dream Office REIT sold eight properties for a total of $71.5 million and invested $20 million in building improvements aimed at attracting and retaining tenants to the remainder of their portfolio.
Leasing activity for both REITS remain strong. Allied Properties REIT leased over 831,000 square feet of office space in nine months, plus an additional 59,500 square feet at 250 Front Street. As of last week, it was still negotiating five new leases which, if completed, will increase its GLA by 70,000 square feet. Dream Office REIT has already leased 810,000 square feet of office space to date with 219,000 square feet being in the Greater Toronto area. Portfolio occupancy for both REITS remain strong at 93% for Dream REIT and 91.6% for Allied Properties REIT.
What does this mean for business owners? In short, if you are thinking of renting or leasing office space in Canada, act quickly but responsibly. Available office space is out there but there may be slim pickings when finding the ones that would be ideal for your organization.
Emory, Michael R., Allied Properties, “Allied Properties Real Estate Investment Trust Announces Third-Quarter Results with Continuing Broad-Based Momentum”, Market Wired
Dream Office REIT, “DREAM OFFICE REIT REPORTS THIRD QUARTER 2014 RESULTS”, dream.ca/office