Toronto braces for new office tower onslaught

[SamiToronto]

Toronto braces for new office tower onslaught


Toronto’s downtown office market appears poised to explode again with construction, as the commercial real estate industry waits for that one spark to kick start the office sector.

Rumours continue to swirl that Brookfield Office Properties will begin a new round of aggressive building in the country’s largest office market with an announcement that it will go ahead with the second tower for its Bay-Adelaide Centre which provided much of the impetus for a round of construction when its first tower was announced in 2006.

Accounting and consulting firm Deloitte Canada is said to be the big fish Brookfield is courting for its second tower while the CPP Investment Board is said to be looking for as much as 180,000 square feet of space.

“I think we are definitely at the point where we can justify new construction,” says Ross Moore, director of Research for Canada for CB Richard Ellis, about the current vacancy rate of 4.7% in Toronto’s downtown core.

Brookfield spokesman Melissa Coley says there is nothing to report on the project other than it’s in planning stages. The company’s web site says its new building Bay Adelaide East is a 43-storey, 900,000-square-foot office tower.

“You can feel the wave building by the day,” says Mr. Moore, about new construction. “I think in the next 60 days we are going to have announcements that will probably surprise a lot of people.”

If you add up everything that is about to be built in the downtown it equals 4.1-million square feet, just slightly below the 4.4 million square feet built in the last wave of construction.

Among the buildings in addition to Bay Adelaide expected to go, or already under construction, are RBC WaterPark Place, a 933,000 square development by Oxford Properties Corp., One York, an 800,000 square foot project from Menkes Developments Inc. and the Healthcare of Ontario Pension Plan and 760,000 square foot building from GWL Realty Advisors which has signed up two major tenants.

“We are getting to that point that we were at in 2006,” Bill Argeropoulos, vice-president director of research with Avison Young. “There is a lot of rumbling in the marketplace. Obviously we are on cusp of the next development wave.”

His company projects the overall downtown vacancy rate at 5.3% and notes the earliest any new office supply can be delivered in the downtown core would be 2014.

The risk for landlords as these buildings begin construction is they end up cannibalizing their own tenants unless they can do what a company like First Gulf did and attract a tenant like Coca-Cola Canada back to the downtown core.

“There has been a bit of reverse migration,” said Mr. Argeropoulos. “There has not been a lot examples that this is a trend. Last go around there was Telus Corp.”

All of this comes as the Bank of Nova Scotia continues to be in the midst of selling its head office in the heart of the financial district. Even with an aging building, Scotiabank has attracted numerous offers for the building which is expected to fetch well beyond $1-billion.

“[Commercial] development also continues to compete with residential development [for space],” says Mr. Argeropoulos. “You have all these people living downtown but they also want to work downtown.”

Dean Newman, principal and broker of record for Cresa Toronto which represents tenants, said it could be a opportunity.

“Landlords are propping themselves up to launch new buildings and there is an appetite in the market for new buildings,” said Mr. Newman. “Part of this is driven by the desire of tenants to reinvent the way they are using space and their layouts.”

He says rents in the heart of the financial district remain high and that has many looking just outside for a better deal in a newer product.

“If you can buy a new car at the same price as an old car, just because the old car theoretically has a more prestigious sticker, why bother,” said Mr. Newman. “It’s like a brand new Hyundai, you see it on the road and say ‘what is it.’ You look at it decide the car looks pretty nice.”

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Posted in: Property Post Tags: commerical real estate, construction

Garry Marr

gmarr@nationalpost.com

[Taller, Better]

Why the heck doesn't someone build a supertall, then? Sounds like the time is right. I'm amazed how ultra cautious they are for office space, and how incautious developers are for condo towers.

[Nouvellecosse]

But don't developers require something like 70% of condo units to be sold before they will start construction? That's doesn't seem hugely different from office developers requiring a lead tenant to take a big percentage of the space before construction. I suspect it's just a matter of it being tougher to find someone to take the majority of a super tall as opposed to something under 220m. There just aren't many huge tenants in Canada.

Although I don't know why they couldn't just find lots of smaller tenants to pre-sign instead...

[Toronto2008]

I hope this means that 100 Adelaide is a go (and hopefully taller )

[Mercenary]

Where will the second Bay-Adelaide Tower go up?

Can someone point it out on a map

[isaidso]

Directly to the east of Bay-Adelaide I. The small public square depicted below will separate the two buildings. Bay-Adelaide II will go where that temporary restaurant is right now.

[Innsertnamehere]

the green one on the left is BAC2.

the green one on the right is BAC3.

and the green one on the top is RAC3

[ONE HUMAN]

And the yellow one is a giant Lego block.

[Innsertnamehere]

the yellow one is INDX lol.

[isaidso]

It's hard to imagine where else they can build major office blocks in the CBD after those get built.

[Taller, Better]

There may be a handful of spaces that could be freed up by demolition... .not a lot of sites, but there are some that certainly could be demolished.


I'll make a list!

[Nouvellecosse]

Well hopefully once all space in the financial district has been occupied, major office buildings will start being constructed throughout the rest of downtown. There are lots of tall (150m+) residential buildings going up throughout downtown, but tall office buildings have been limited to a smallish area.

The last thing I want to see is developers desperately demolishing and Façadomizing structures to pack more into a ridiculously small space. Yes, high density nodes are nice, but I find them nicer when they have a rich variety of architecture including both skyscrapers and historic low and mid rise buildings.

[Taller, Better]

Originally Posted by Nouvellecosse

The last thing I want to see is developers desperately demolishing and Façadomizing structures to pack more into a ridiculously small space. Yes, high density nodes are nice, but I find them nicer when they have a rich variety of architecture including both skyscrapers and historic low and mid rise buildings.

In general I agree with this wholeheartedly, but not every single building in the downtown core is either historical, or of architectural merit. Hanging onto every single structure simply because it exists can be a bit counter-productive.

[monkeyronin]

Of the few lowrise buildings in the financial district, most aren't even historic. The only ones I cant think of that are worth saving are the Toronto Club building at York & Wellington, and the Graphic Arts building at Richmond & Sheppard. Otherwise, we're talking stuff like this, or maybe some of the massive podiums of certain towers (like FCP's).

[Nouvellecosse]

That stupid ugly podium at the Exchange tower needs to bite the dust. I wonder how large a tower that site can support.

[isaidso]

Originally Posted by Nouvellecosse

Well hopefully once all space in the financial district has been occupied, major office buildings will start being constructed throughout the rest of downtown.

I'd prefer to see major office buildings constructed throughout the downtown now. The CBD already looks great; it's those areas north of Dundas that could do with a Scotia Plaza or TD Centre.

[GenericUser]

Originally Posted by Taller, Better

In general I agree with this wholeheartedly, but not every single building in the downtown core is either historical, or of architectural merit. Hanging onto every single structure simply because it exists can be a bit counter-productive.

You are my hero! Please join Urban Toronto and try to educate the preservationist lunatics there

[Mollywood]

There are still lots of good sites to build office towers, east of Yonge Street. There are many small crappy buildings that should be torn down, as well as lots of parking lots, some of which are quite large. So we still have lots of room to expand.

[Epi]

Weren't those huge podiums at FCP and the Exchange Tower built because they HAD to in order to get the density approved? And now that they are there, I don't see how they can build any building of any size, because there would be no space between this new building and the older building, thus completely blocking out the windows on one side of both buildings.

[Taller, Better]

I want those luxuriously large podiums to stay as they are on the big Bay Street bank towers. I understand and agree with the theories behind the original demands for them, and don't want new towers crammed onto those spacious and rather gorgeous plazas.