The report reveals a trifecta of forces -- rising rents, declining vacancy rates and increased demand -- that have led to office and other commercial spaces in Toronto rising in value.
The vacancy rate for commercial property fell to 6.3% in Q3 down from the 7.2% for the previous quarter, while the average rent rose to $17.83 per square foot per year, up 13% from 2011.
According to John Arnoldi, executive managing director for Collier’s Toronto, the city’s boom is in its infancy.
“With such low vacancy rates, which are expected to drop even further, the pipeline of new inventory and projects that are underway is relatively conservative compared to similar North American cities such as Boston and New York,” he said. “Additional demand for downtown office space is also going to be fuelled by what we see as the reverse migration trend of businesses relocating back to the core.”
The demand for downtown space is already evidenced by the going rate for facilities in the city’s core, climbing over 10% in the past year. Midtown Toronto is also commanding attention, with vacancy rates sitting at 5.5% and a relatively low average rental rate of $16.88 per square foot. It’s appealing to big businesses such as Postmedia, which purchased 85,000 sq. ft. on Bloor Street last quarter.
But while the rental rates may be low now, Colliers hints at a rise on the horizon to reflect the growing interest in the area.
TREB reported similar promising numbers for the non-residential market. The Commercial Division Members reported just under 800,000 sq. ft. of commercial space had been leased last month, a 41% increase in comparison to October 2011.
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