Toronto’s office vacancy rate fell to a new low, as businesses relocated to the downtown core and tech companies sought space in the city.
The office vacancy rate hit 2.7 per cent in the fourth quarter of last year, down from 3.1 per cent in the previous quarter and 3.7 per cent in the previous year, according to data from commercial realtor CBRE.
“It is a very, very tight market. I don’t anticipate it slowing down any time soon,” said Jon Ramscar, an executive vice-president with CBRE. “The wave of demand from the tech side is unprecedented."
Software company SAP Canada Inc. and the head office of Tim Hortons moved to downtown Toronto last year. They followed the migration of other well-known companies, including Deloitte, Coca-Cola Co., Yellow Pages Ltd., Mattamy Homes, Capital One Financial Corp. and Universal Music Group.
Part of the attraction is access to a large pool of skilled workers in Toronto. Mr. Ramscar said there was a big drive for “good quality labour.”
Since late 2010, Toronto’s office vacancy rate has been steadily declining, as the tech industry has joined other businesses in either setting up shop, expanding or moving to the city. Toronto has had the lowest office vacancy rate in North America since the spring of 2016.
The lack of space combined with strong demand has underpinned office developments in the city’s core. Ten office buildings are currently under construction, including two skyscrapers that will each add one million square feet.
Tech companies are responsible for preleasing a significant amount of space in the new buildings. Their preleases – a contract that requires a deposit to lease the future space – account for a fifth of the 9.1 million square feet in those office developments, according to CBRE.
“These requirements that are coming through from tech market, some of these deals are 400,000 square feet plus. These are what we call megadeals in the office market,” Mr. Ramscar said.
Shopify has committed to taking space in a giant office, retail and residential complex called The Well, which is slightly west of the financial district and expected to open around 2021. Microsoft is taking a chunk of space in a skyscraper called CIBC Square, which is due to open in 2020. Startup incubator MaRS Discovery District is expanding into a new building on Toronto’s waterfront. That building is scheduled to open in 2021.