The growing importance of tech companies has pushed Toronto’s office segment towards having the largest investment volume of any commercial property type last year, according to Avison Young’s Commercial Real Estate Investment Review: Greater Toronto Area analysis.
“Sellers are taking advantage of the extremely tight market and fierce competition among buyers,” the Avison Young study noted.
The sector represented a significant chunk of the city’s overall commercial investment, which ended up at a record-high $15.6 billion in 2018.
Toronto’s office market was also the only commercial asset class that enjoyed quarter-over-quarter growth during Q1 2019, increasing by 8% annually to reach a total of $767 million. This also represented 28% of the regional commercial market’s overall volume for the quarter.
However, Avison Young warned that “despite buyers’ enthusiasm, a bid-ask gap is impacting deal velocity and some anticipated sales (such as those of Bloor Islington Place and AeroCentre) have yet to materialize.”
Earlier this year, CBRE’s Paul Morassutti said that the tech industry will serve as the Canadian commercial real estate market’s pillar of stability in the event of a recession.
“Over the past 10 years, tech has grown at more than 2.5 times the pace of the energy sector and three times the overall economy,” Morassutti said in late February. “Tech companies anchoring new buildings is something we have virtually never seen before.”
This is crucial in light of GTA’s overall commercial activity in recent times, which fell by 18% quarter-over-quarter to $2.7 billion. Q1 2019 was the second straight quarter that saw no commercial property type getting more than $1 billion in transactions.