Toronto — In its Real Estate Market Research study published today, Newmark Knight Frank Devencore reported that tenant demand for new office space in downtown Toronto remains very strong. Most of the space delivered to the market over the past few years has been absorbed and the three new office developments that will be delivered in 2017 ̶ the 450,000-square-foot Globe and Mail Centre, the 900,000-square-foot EY Tower and the 800,000-square-foot One York Street ̶ have already been over 95% pre-leased.
“The good news is that the next major development cycle is now underway, sparked by the announcement of two substantial projects: Ivanhoé Cambridge and Hines’ Bay Park Centre and Cadillac Fairview’s 16 York,” said Allan Schaffer, President/Broker of Record of Newmark Knight Frank Devencore’s downtown Toronto office.
The Bay Park Centre is a two-tower, 2.9 million-square-foot development on a 3 million square foot campus near Union Station. CIBC has already committed to 1.75 million square feet. 16 York, an 879,000-square-foot tower, is being built on spec, a reflection of the developer’s confidence in the strength of current tenant demand.
“With the announcements of the Bay Park Centre and 16 York, the number of building sites that remain in downtown Toronto has been significantly reduced,” Mr. Schaffer added. “With building space in and around downtown Toronto in extremely short supply, areas to the east and west of the core will likely draw increasing interest from developers. The trend towards making greater use of existing buildings by adding new structures on top of these buildings, as was done at 134 Peter Street and is being proposed at 19 Duncan Street, may gain further traction as well.”
Vacancy Rates Stable
The vacancy rate for all office classes in downtown Toronto was 6.5% at the end of 1Q17, virtually unchanged over the past year. However, approximately 1.2 million square feet of inventory has been brought to the market over this period. Average gross rent for all office classes has continued to climb and is currently $42.95/sf, up from $40.87/sf a year ago.
“With the next wave of development set to take shape in 2020, a landlord’s market will likely prevail for many space categories over the next few years,” Mr. Schaffer said. “The best leasing opportunities will be found in the buildings that have been vacated by tenants moving into the newer towers. Options are much more plentiful in the suburban submarkets, where vacancy rates are considerably higher. With demand remaining strong, tenants should begin making occupancy decisions as soon as possible.”
To read the complete market study, follow this link.
About Newmark Knight Frank Devencore
As part of Newmark Knight Frank, one of the world's leading commercial real estate advisory firms, Newmark Knight Frank Devencore is Canada's largest corporate real estate advisor and brokerage, exclusively representing corporate, industrial and retail space users. With offices across the country, Newmark Knight Frank Devencore offers its global clientele comprehensive services that are individually designed to ensure executive real estate decisions are supported by effective strategies and professional execution. To learn more about our capabilities, please visit www.devencorenkf.com.
About Newmark Knight Frank
Newmark Knight Frank (NKF) is one of the world's leading commercial real estate advisory firms. Together with London-based partner Knight Frank and independently-owned offices, NKF's 14,100 professionals operate from more than 400 offices in established and emerging property markets on six continents.
With roots dating back to 1929, NKF's strong foundation makes it one of the most trusted names in commercial real estate. NKF's full-service platform comprises BGC's real estate services segment, offering commercial real estate tenants, landlords, investors and developers a wide range of services including leasing; capital markets services, including investment sales, debt placement, appraisal, and valuation services; commercial mortgage brokerage services; as well as corporate advisory services, consulting, project and development management, and property and corporate facilities management services. For further information, visit www.ngkf.com.
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