Greater Toronto Area

‘Commercial Property for Sale’ Demand Drives Anticipated Double-Digit Increase in Vacant Leased Office Space in GTA by 2016

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Major real estate companies agree—the current demand for commercial property for sale will definitely impact vacancy rates of leased commercial property within the GTA over the next three to four years.

A report by commercial leasing company, Colliers International, notes that demand and vacancy rates for leased commercial property, particularly office space in the GTA region, has been steadily decreasing over the last two quarters of 2013, so much so that the vacancy rates in Toronto’s downtown core hit an all-time low of 3.9 percent in the third quarter of 2013 (1.2 percent less than last year). At the same time, a recent annual commercial report from RE/MAX noted that demand for industrial buildings and retail storefronts for sale along the subway and other major transit lines has remained unprecedented despite the lack of inventory of such commercial property for sale.

Such demand activity for commercial property for sale seems to be driven primarily by the arrival of smaller investors, young professionals and end users taking advantage of the low interest rates and healthy rates of return and looking to buy shops and other commercial properties rather than rent, because they know the rental market remains so tight and vacancy rates are so low in Toronto that, according to commercial realtor Michael Davidson, they could easily lease out units above a store for top dollar.

“There’s a lot of money chasing a limited supply of commercial product, be it multi-unit residential, industrial, or retail storefront,” says Gurinder Sandhu, Executive Vice President, Regional Director, RE/MAX Ontario-Atlantic Canada. “In some areas of the country, we’re seeing unsolicited offers on product not available for sale—often well above market value.”1

Currently, in response to the current commercial property demands, the City of Toronto has more than 7.3 million square feet of new commercial property space under construction, largely in fast-growing areas such as the new South Core between Union Station and Lake Ontario.

“But there’s no doubt that tenants are keenly anticipating the coming glut of new office space and “trying to hit the opportunistic window” by signing leases now that only last until 2016 or 2017 so they are more firmly in the driver’s seat and able to negotiate renewals or moves with incentives or lower rates as vacancy rates are likely to soar close to double digits”. Susan Pigg, Business Reporter, Toronto Star 2

References:

1 RE/MAX Media Newsroom, “Tight commercial inventory levels impede sales activity in most major Canadian real estate markets, says RE/MAX”, Mississauga October 29, 2013,

2 Susan Pigg Business Reporter, Toronto Star, “Glut in office space to hit GTA: report”, October 9, 2013 (Reposted October 29, 2013)

3 Susan Pigg Business Reporter, Toronto Star, “Commercial real estate a hot commodity in GTA”, October 29, 2013

4 Colliers International, “GTA Industrial Report for Fall 2013”

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GTA vs. Downtown: The Better Choice for Your Office Space Relocation

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Planning to move into a new office space in either Downtown Toronto or the outskirts of the Greater Toronto Area (GTA)?

Moving into either location is a crucial decision that will not only affect your pool of customers or the clients that you will attract, but also the employees that will be working for you. In recent years, several developments have taken place that you should factor in when weighing your decision.

Toronto Downtown

According to a recent report by TD Bank, Toronto downtown’s population has more than tripled in the last five years. Echo Boomers, those who were born between 1972 and 1992, are largely responsible for this. The Echo Boomers comprise the new young generation—aspiring, energetic, and highly educated. If you are looking for a labor pool with talented and skilled people, downtown seems like an easy answer.

But take note: this will not necessarily be the trend in the next decade or so. After all, the Echo Boomers are a product of their parents who chose to leave downtown back in the 70s to buy homes in the suburbs.  It’s too early to say that the Echo Boomers will stay once they hit late adulthood or old age.

Toronto downtown is quickly turning into a world-class city, and the development in its infrastructure, public facilities, and other services has never been this fast.

Greater Toronto Area

While Toronto Downtown is on its way to establishing its status as a booming industrial location, GTA has well established itself as such. Currently, it holds over 200 million square feet of office space—much more office space than Toronto Downtown, although of course most of this has already been filled by offices.

The population in GTA is much larger and more diverse.  It is growing by more than one million each decade, and promises more jobs in the next few years as office development is one of the major thrusts of the area.

If there’s any problem, perhaps it is the public transportation system. Employees have been grumbling about poor transportation and twisted highways.

Verdict

Either area has its highlights. If you want a more stable area that will more or less retain its demographics in the next few years, GTA seems like the smarter choice. But you shouldn’t dismiss the clear advantage of Toronto Downtown. Big companies like Google Inc and Coca-cola are relocating offices into the area for a reason, and the brightest young minds are moving into the area. Can you afford to stay away from the place everyone is clearly talking about?

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