Oxford Properties and the real estate arm of Canadian Tire (CTC-T) have announced plans for five office and apartment skyscrapers in midtown Toronto, as landlords bet on the market rebounding despite the pandemic driving workers from office towers and slowing demand for downtown condos.
This is the second large office development in the city announced this month, and comes as the office and condo markets soften. The office vacancy rate has nearly doubled to 4.7 per cent since last year with tenants big and small offloading space. As well, apartment rental rates and condo prices have dropped amid the glut of new condos.
“There is a lot of concern today about developing large office spaces and condos when we are seeing vacancies going up. But we have to disentangle the short-term impact of working from home,” said Carl Gomez, chief economist with CoStar Group, a commercial real estate company. “At some point we will return to work.”
Oxford and other office landlords are betting that workers will return to using corporate offices and that companies will continue to view Toronto as a top destination, with firms such as Amazon.com Inc. recently brokering large office leases in the city.
For Oxford, the 9.2-acre site at the busy intersection of Yonge Street and Eglinton Avenue will be its largest development in Toronto. It is also the most high-profile project for CT Real Estate Investment Trust (REIT), which was spun out of Canadian Tire in 2013 to make money from its large portfolio of retail properties.
Under the proposal, the tallest building will be 60 storeys and the shortest will be 45 storeys, according to Oxford. The five towers will include 650,000 square feet of new office space, 2,700 new housing units and 10,000 square feet of community space. About half of the site has been set aside for green space.
The housing units will be mostly apartments or purpose-built rental units, with the majority of the units one-bedroom and studios.
Oxford, the real estate company of Ontario Municipal Employees Retirement System (OMERS), and CT REIT will co-own the project. Oxford, which co-developed the 28-acre Hudson Yards office, condo and retail district in Manhattan, will develop the Toronto project and manage the property on behalf of the partnership.
CT REIT, which mostly leases to Canadian Tire and its other brands, is following in other retail landlords’ footsteps and has identified dozens of its sites, from Corner Brook, N.L., to Dawson Creek, B.C., as ripe for development. (Canadian Tire’s corporate home office is located in one of the buildings on the Toronto redevelopment site, according to its website.)
Shopping centre owners such as RioCan REIT and SmartCentres REIT have been redeveloping their retail locations into ones that include housing and office space, including RioCan’s redevelopment at the same intersection.
Yonge and Eglinton is a popular residential and shopping spot on the main north-south subway route in Toronto. The area has become a destination for developers with a new east-west light rail transit line being installed on Eglinton Avenue.
A spokesman for Oxford would not provide the cost of the development or say if the partners would be splitting the costs evenly. CT REIT did not respond to a request for comment.
If the plan is approved, construction would start after the new public transportation is finished, which is scheduled for the fall of 2022. After that time, the project is expected to take up to five years to complete. Currently, the site has three office buildings, which will be demolished for the new development.
Earlier in December, Dream Office REIT announced plans to build a 79-storey building just west of Toronto’s financial district; the project would include 660,000 square feet of office space, 588 residential rental units and 10,000 square feet of retail and restaurant space.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.