Record-low vacancy rates attract commercial investors

“The national central market office vacancy rate fell to 5.0 per cent in the second quarter of 2012, down from 5.4 per cent in Q1,” according to the National Office Trends: Second Quarter Report, released Monday by Cushman & Wakefield. “This is only the second time vacancy has dipped to this rate since 1985.”
That'is already translating into a minor building boom in key markets across the country, as developers move to satisfy growing need. Still, the construction doesn’t come close to satisfying future demand, and both individual and group investors are expected to claim a large share of the hundreds of smaller projects, especially those in downtown areas.

“There is a significant new office development cycle currently taking place in some markets – a level of building activity not seen since the early 1990s,” said Pierre Bergevin, rresident and CEO of  C&W C. “This should address a portion of the current pent-up demand, which is being largely driven by the aggregation of workspace and employees, greater productivity found in more modern building operations, and proximity to the workforce.”

Downtown is increasingly where it’s at for investors in Canadian commercial properties, with another report pointing to the number of young -- very urban -- professionals now dictating office location.
"In general, the flight to the suburbs is not expected to happen for most (business) organizations as the competition for young talent continues to heighten and firms continue to look at opportunities in close proximity to Union Station," reads the spring 2012 office market report from Colliers International. "As the Finance, Insurance, and Real Estate (FIRE) sectors continue to be strong in Toronto, there will be downward pressure on commercial vacancy and upward pressure on rental rates"
Downtown developments -- a Mecca for talented young workers -- make up more than half of current construction, with 1.5 million square feet currently under construction, out of the 2.5 million square feet across the GTA.
“Downtown has increasingly become a popular living destination for many young professionals, who want to live in close proximity to their workplaces,” the report says. “The City of Toronto has more construction cranes building high rises and skyscrapers than any other North American city and nearly triple the amount in New York City.”

 

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