Through the first half of 2011, the downtown office vacancy rate is now 5.9%, compared to an overall Greater Toronto Area (GTA) rate of 8.4%. The availability rate for downtown was at 8.4% and at 10.2% for the GTA.
“Over the last 12 months, the GTA office leasing market has performed exceptionally well, supported by a continued steady flow of lease transactions, eroding the supply of available space options along the way and altering the landlord-tenant relationship,” said Bill Argeropoulos, vice president and national director of research for Avison Young.
The advantage is starting to swing towards the landlords again in a market that had once been favouring tenants with double-digit vacancy rates. Tenants now have to act faster and be prepared to compromise more as there are increasing competitive situations where multiple tenants are vying for spaces, said the report.
“The theme across the board is clearly one of tightening,” described Avison Young Principal Jonathan Pearce. “In both downtown and midtown Toronto, we are seeing the pendulum swing further in favour of landlords.”
In midtown, that narrowing availability is especially being seen on the prestigious Bloor Street, but Pearce said it’s really across the board in terms of AA, A, and B asset classes.
It’s not a situation that’s likely to change soon based on a limited supply of offices.
“Delivery dates of additional proposed new buildings are too far out to generate any meaningful new supply in the short term,” said Pearce.
Eventually, the new office space will come, however. Argeropoulos said there is more than nine million square feet of office space spread over a dozen projects in the Toronto area. More than two thirds of that proposed office area is outside the more traditional office centre of the Financial Core. Instead, it is primarily in the Downtown South market and areas east of the core and along the waterfront.
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