Cadillac Fairview announced today it plans to build a $800-million skyscraper in downtown Toronto, adding another new office tower to a city struggling to meet business’ demands for space.
Twenty-three new office buildings are currently being built in the Greater Toronto Area, more than half of which are being constructed “on spec,” or without first securing a major tenant.
Cadillac Fairview, the real estate company owned by the Ontario Teachers’ Pension Plan, will be responsible for 70 per cent of the construction bill, and the Investment Management Corporation of Ontario will pay the rest.
The 46-storey building will be located on the northeast corner of Front Street and Simcoe Street. It will become home to the teachers’ pension fund (OTPP), whose main office has been north of the city for decades.
OTPP is the latest entity to seek real estate in the heart of the city, where office vacancy rates are at a record low as businesses clamour to be downtown.
Earlier this year, Tim Hortons said it would move its head office from Oakville – about a 30-minute commute away from Toronto – to the downtown core.
“To attract a quality workforce, more and more you have to be located somewhere in the downtown area,” said John Sullivan, chief executive with Cadillac Fairview. “In terms of hiring practices, I think it is much easier if you are located now in the downtown area versus the suburbs.”
The business expansion has driven the office vacancy rate in downtown Toronto to 2.9 per cent, according to commercial realtor CBRE. That is the lowest in Canada and the United States, below the vibrant business centres of Manhattan and San Francisco.
This will be the fourth office building project in downtown Toronto for Cadillac Fairview, which took a chance on constructing another property “on spec” a few years ago.
Mr. Sullivan said he has secured a number of tenants for that project, known as 16 York, including a large financial-services firm. That building is expected to be ready late 2020, and will be the first of the city’s major office tower projects to open its doors.
“The success we have had leasing that building has given us, to some extent, the confidence to go ahead with a larger project,” Mr. Sullivan said.
At 46-storeys, or 1.2-million square feet of office space, the skyscraper announced today is a more ambitious project. In comparison, 16 York is 33 storeys, or 870,000 square feet of office space.
According to Mr. Sullivan, the Front St. building will have the potential for roof-top amenities, such as a restaurant. It is expected to open late 2022.
OTPP is expected to take nine floors, or about one-fifth, of the new building.