There was a slower pace of office leasing activity in the Downtown and Midtown areas of Toronto in the first quarter of 2018, but transactions in existing space was constrained by low availability.
This has given a boost to the area’s suburban markets according to Avison Young, which says that those areas outpaced activity in the Downtown and Midtown markets by a margin of around two to one.
“Coming off a banner year in 2017, I don’t think we were overly surprised by the market’s somewhat subdued, yet overall positive, first-quarter results,” comments Bill Argeropoulos, Principal and Practice Leader, Research (Canada) for Avison Young. “In all, demand continues to outpace new supply, and nowhere is this trend more apparent than in Toronto’s growing Downtown market.”
The Downtown office vacancy rate was just 2.5% in Q1 2018, and there is no meaningful relief in terms of new supply until 2020.
“With very few options to choose from, rental rates have experienced significant upward pressure,” adds Argeropoulos. “Our analysis reveals that, on average, starting face rates for deals in class A Downtown space increased 28% in 2017 compared with 2016 – the largest year-overyear jump since the Great Recession. Although each deal is different, in many cases, what would have been a $35 face rate a year ago is now $40 or more.”
Avison Young’s full First Quarter 2018 Greater Toronto Area Office Market Report is available at avisonyoung.com
