Office construction heats up in Toronto suburbs

by Neil Sharma on 09 Aug 2019

Since the beginning of the century, new office construction has left Toronto’s suburbs for the downtown core, but that’s beginning to change.

According to CoStar Group, a leading multinational commercial real estate data analytics firm, suburban office construction has kept pace with downtown Toronto construction in recent years, a trend it forecasts will continue for at least the next five years.

“Over the last decade, we’ve been hearing about high-profile moves from the suburbs to downtown—and it is happening and it’s a distinct trend—but at the same time, there are still users who want to be out there,” said Roelof van Dijk, CoStar’s market economist for Canada. “A lot of employees just don’t want to deal with the commute.”

While avoiding Toronto’s onerous suburb-bound commute is certainly a key reason, van Dijk says population growth provides the most insight into why the suburbs are still primed for growth in office space.

“When you look at where the population is growing and where new supply by square footage is happening, it’s telling,” continued van Dijk. “It’s as close to 50-50 as you’ll get over a 10-year period. There’s also been a supply boom downtown during that same period.”

In fact, analytics provided to CREW by CoStar show that between 2014 and 2024, downtown Toronto has about 52% of the share of construction with the remaining 48% in the suburbs.

“When you look at the actual construction, it isn’t a story when you hear about small offices in the suburbs,” said van Dijk. “The story is 1.5 million square feet at CIBC Square.”

Another salient factor for the growth of office space in Toronto’s immediate suburbs is transit servicing. Mississauga is intensifying and, in the process, shedding its reputation as a giant banal Toronto suburb, and the Vaughan Metropolitan Centre has a subway station connecting it to Toronto’s core.

“Office space in downtown Toronto is fortified by public transit, but the main point for the suburban office market is where do you see the health and continued growth? It will be in more urbanized suburbs, like Mississauga City Centre and Scarborough Town Centre, downtown Markham, Vaughan Metropolitan Centre,” said van Dijk. “Places off the beaten track that aren’t serviced by higher order public transit, whether LRTs or Bus Rapid Transit, will experience weakness.”

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