Toronto office rents soar 17.5 per cent as companies bypass suburbs to settle in the city

[Skybean]

Toronto office rents soar 17.5 per cent as companies bypass suburbs to settle in the city
Published On Fri Feb 17 2012

By Susan Pigg Business Reporter

Companies appear willing to pay the price to open or expand offices in Toronto’s booming downtown, despite rents that jumped 17.5 per cent last year.

Unexpectedly strong demand for space in the core helped push office vacancy rates down to just 4.7 per cent in 2011. That’s placed Toronto No. 4 among the world’s Top 10 cities seeing significant increases in office rental rates, according commercial brokerage Cushman & Wakefield.

“Toronto has come through an extremely robust period of demand and it has tightened the market to the point where it’s challenging to find the quality locations for companies that are in the market right now,” says Stuart Barron, national director of research for Cushman.

The hefty rent increases not only point to Toronto’s international appeal as a safe place to do business, but a shift in thinking among companies that previously would have been inclined to set up shop in the suburbs, says Barron.

http://www.thestar.com/business/arti...-the-city?bn=1

edited by Taller, Better
article abridged.

[Taller, Better]

And the Economist seems to be thinking Toronto is in a tailspin; hehe..
Skybean, would you mind to edit out some of that article, and just have links to the original, with the first paragraph and a bit quoted. Refer to the sticky on allowable quoting if necessary. Thanks!!

Anyway, with the market tightening and office rentals going up, no wonder we are hearing news of possible supertalls...

[InTheBeach]

I love reading bad press on Toronto - stuff like how the media jumped on Toronto as losing out on growth to the west (hello, a 9+% growth rate for a city this size is stupendous).

While you know my views on the condo market, this report does not surprise me at all, and is something I predicted a few years ago (people living downtown will want to work downtown). And voila, here it is.

[taal]

I can see it continuing but keep in mind; The rest of Toronto basically sees 0 commercial growth while the 905 is still booming (again commercially).

I can't help but wonder, the factors that make the outer 416 unattractive (i.e. high taxes) compared to the 905, probably does factor into the core as well ... how much more construction would we be seeing (office construction) ... its sad to think about.

[Filip]

The main thing is that the trend of companies relocating from the core to the suburbs is reversing.

Just recently there was talk of moving a BMO department from FCP to their Meadowvale campus, and everyone from employees to senior managers threatened to quit.. They quickly decided against it. Companies would lose the bulk of their talent making such reckless moves. New companies settling in the suburbs, fine, but the trend of large swaths of operations moving to the 905 from the core has ended.

[Marcanadian]

Originally Posted by Filip

The main thing is that the trend of companies relocating from the core to the suburbs is reversing.

Just recently there was talk of moving a BMO department from FCP to their Meadowvale campus, and everyone from employees to senior managers threatened to quit.. They quickly decided against it. Companies would lose the bulk of their talent making such reckless moves. New companies settling in the suburbs, fine, but the trend of large swaths of operations moving to the 905 from the core has ended.

Same thing happened to my dad. His office went from Bloor and Keele, to Dufferin Mall, to Dundas and Kipling, then they wanted to move somewhere near Pearson. So my dad retired partly because of the commute it would have resulted in.

[Filip]

It's easy and relatively stress free to commute from the 905 to the core (GO Transit's only redeeming feature), but good luck getting from Mississauga or Oakville to Markham or Richmond Hill. That would be the commute of nightmares.

Our department is FULL of people from Vaughan, Oakville, Oshawa, Hamilton who commute using GO. They have no complaints as it's relatively stress free and easy.

[Innsertnamehere]

thats why the core is so attractive for office space, its easy for everyone to get to, no matter where they live in the city.

[Diesel_Power]

I think part of the reason it's difficult to live in one 905 region and work in another is that cities like Brampton, Vaughn. Mississauga don't really have a defined downtown core where commercial buildings generally set up.

Poor urban planning from previous mayors, and urban sprawl from home developers have hindered the GTA's ability to be more efficient.

[current]

Toronto's new financial district is called South Core? - The Grid online article:
Goodbye, Bay Street. Hello… South Core?
For a growing number of Toronto companies, the grass is looking greener south of the tracks, several blocks away from Bay Street. Inside the new “south core” financial district—how it’s catering to younger workers and what it means for the city.

BY: DANIELLE GROEN
WED FEB 29, 2012

The view from the corner of York and Bremner is a work in progress. Facing south, it doesn’t look like much now: the ubiquitous Toronto tableau of cranes and construction pits flanking a congested line of traffic, with the Gardiner bisecting the horizon and blocking out the lake. But that will soon change. In the next four years, at least four brand new, sky-scraping towers will be visible from this corner—and another four will be nestled in the blocks close behind...

...Already, the two glistening structures that straddle York Street—the Telus Tower at 25 York, which opened in June 2010, and the PricewaterhouseCoopers Tower at 18 York, which opened last September—are poaching tenants from the financial district. Insurance companies, engineering firms and mining corporations have all relocated, in addition to the telecommunications and accounting giants. Then, last October, it was announced that Canada’s largest bank, RBC, would make its own leap south, opening a new domestic headquarters on Harbour Street for 2014. When all eight south core buildings are complete, an additional 7.3 million square feet of real estate will have been added to the roughly six blocks bordered by Lower Simcoe, Bay Street, the tracks and the lake. That will triple the size of the existing south core. (Got a better name for this new neighbourhood? Tell us -http://www.thegridto.com/city/places...or-south-core/ )...

Map: http://www.thegridto.com/images/Map.html

Read More: http://www.thegridto.com/city/places...lo-south-core/

[ACT7]

http://business.financialpost.com/20...-market-soars/

Toronto office market soars

Garry Marr | Oct 22, 2012 5:25 PM ET
More from Garry Marr | @DustyWallet

Rents are up and demand for space has hit an all-time high in the greater Toronto area office market, according to a new report from Colliers International.

The real estate firm says the average vacancy rate across the GTA was 6.3% in the third quarter, down from 7.2% a quarter earlier. The downtown vacancy rate dropped from 5.5% to 5.1% over the same period.

The strong demand helped bring the rate on asking rent with the average in the GTA $17.83 per square foot per year, up 13% from a year earlier.

At that level, rates are where they were prior to the recession of 2008. Asking rate for AAA facilities in the downtown core climbed more than 10% from a year ago to an average of $32.03 per square foot, up from $28.79 a year earlier.

“Contrary to the perception that the Toronto office market may be overbuilt, the numbers are telling a different story,” says John Arnoldi, executive managing director in the Toronto region for Colliers.

“With such low vacancy rates that are expected to drop even further, the pipeline of new inventory and projects that are underway is relatively conservative compared to similar North American cities such as Boston and New-York. Additional demand for downtown office space is also going to be fuelled by what we see as the reverse migration trend of businesses relocating back to the core.”

Midtown Toronto also showed strength with the vacancy rate down to 5.5% as rental rates at an average of $16.88 per square foot helped bring business into the area.

“The move of Postmedia network to the area, the entrance of Louis Vuitton and the re-development of the old Four Seasons Hotel and other condominium projects are only some examples,” said the company in a release.

“Colliers expects vacancy rate in the midtown sub-market to continue its decrease, resulting in slight increases in rental rate, especially as it presents a more cost-competitive alternative for companies that wish to set a base in Toronto.”

gmarr@nationalpost.com

[Mercenary]

That means an Office Construction Boom is coming.

[Filip]

Oh believe me.. You have no idea what is in the pipeline.

[Mercenary]

Originally Posted by Filip

Oh believe me.. You have no idea what is in the pipeline.

Do tell

[Filip]

Originally Posted by Mercenary

Do tell

We're about to witness a flurry of tenant/project announcements in the next few months. If all goes well; one of them will be a stunner.

[XpressEnterprise]

Originally Posted by Filip

We're about to witness a flurry of tenant/project announcements in the next few months. If all goes well; one of them will be a stunner.

Ahh, I can't wait to get back. Lived in the states for 22 years, 2 more years cannot come soon enough! I hope the boom will still continue!

[taal]

Originally Posted by Filip

We're about to witness a flurry of tenant/project announcements in the next few months. If all goes well; one of them will be a stunner.

Is this based on anything other then speculation (sorry not trying to come off rude), just curious ? ... no need for sources ... ?

See the reason I say this is I'm somewhat surprised this boom has continued (not condo boom ... but office boom), I say this because of all the talk of business moving from the suburbs (i.e. the 905 ... or outer 416) its really only happened a handful of times. Most of the growth over the last 5 years has been the expansion of the FIRE industry that was already in the core. And the greater core ? (i.e. King / Queen W), the low vacancy rates their are due to the growth in the tech / communications sector (these are mainly small to medium size companies ... a lot of startups actually ... this surprises some people but Toronto is home to many tech startups, there was a recent article sighting its among the top 5 in North America in this regard).

Anyway, a lot of projections as of late have indicated that the FIRE industry in Canada will not see much in the way of growth over the next couple years, as they have already underwent that cycle.

Now I still expect to see some office growth, but namely relocation to new / grade A spaces, but little in the way of expansion.


Is it more then just this ? i.e. industry in the core simply relocating to grade A quality space with slightly lower operating costs (due to new buildings being more efficient) ? If it isn't this can only go on for so long one would imagine !

[Filip]

Not speculations but industry sources. We'll see in the next few months; but it's not surprising all our big players are moving ahead with major projects this year and next.

I couldn't tell you where this growth is coming from as I am nowhere near an expert in this industry, but it's obviously coming from somewhere.

[taal]

Originally Posted by Filip

Not speculations but industry sources. We'll see in the next few months; but it's not surprising all our big players are moving ahead with major projects this year and next.

I couldn't tell you where this growth is coming from as I am nowhere near an expert in this industry, but it's obviously coming from somewhere.

Thanks ! Interesting to know.

As great as this is if it indeed continues, one needs to keep in mind the outer 416 sees next to no growth while the 905 and the core still boom !

[Taller, Better]

Originally Posted by Filip

If all goes well; one of them will be a stunner.

**drools silently**