There’s high demand for office space in Downtown Toronto and tight supply is driving up pre-leasing activity.
CBRE says that with a record-low vacancy rate of 2.7% in the fourth quarter of 2018, the 7.3 million square feet of office space currently under construction is 62.3% pre-leased.
The city’s core is highly popular with the tech sector, which accounted for 20% of all downtown pre-leasing; and co-working operators are also snapping-up space.
Unprecedented demand for newer space continues to outpace delivery of supply across the country, with total net absorption totaling 2.7 million sq. ft. last quarter nationwide.
“Employment conditions in Canada, especially in downtown Toronto, continue to supercharge office demand and tenants are confident enough to make long-term real estate commitments to new buildings,” said Jon Ramscar, the newly appointed Executive Vice President and Managing Director of CBRE Canada’s Toronto Downtown office. “This is bolstering the confidence of office owners and developers and we can expect additional office construction announcements in the months ahead.”
Scotiabank among largest pre-leasers in Q4
Some of the larger examples of pre-leasing include Scotiabank taking 51% of the 820,000-square-foot final tower at Bay Adelaide Centre, which commenced construction in Q4.
Ontario Teachers’ Pension Plan increased its footprint from 260,000 sq. ft. to 341,000 sq. ft. at 160 Front Street, which is expected to be completed by 2022; and LinkedIn committed to 85,000 sq. ft. in 16 York Street, on track for a 2020 completion.
“The strength of the Canadian office market is a testament to the ongoing confidence that employers and investors have in this country and its major urban centres,” said Ramscar. “ Toronto has taken its place on the world stage as a global real estate powerhouse. But this city’s high-quality office inventory is almost completely full and new buildings coming online in the current development cycle are already largely spoken for. Office users seeking next generation office space will have to move fast or be forced to wait for the next round of construction.”
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