It’s getting harder to find office space in downtown Toronto. The city’s office vacancy rate dropped to a new all-time low as a result of strong demand from tech companies, office sharing operators and other businesses, according to commercial realtor CBRE.
The rate for downtown Toronto hit 2.6 per cent in the first three months of this year, compared with 2.7 per cent in the previous quarter and 2.9 per cent in the first quarter of 2018.
That strong demand combined with the lack of space has pushed up rental prices. The average net rent for the top buildings in the city rose 12 per cent to $35.70 a square foot over the first quarter.
CBRE said the increase was driven by strong demand from technology and co-working groups. The commercial realtor did not provide any examples.
However, the city’s biggest co-working operators – New York-based WeWork, and IWG PLC, which is based in Zug, Switzerland – have been expanding rapidly. WeWork will soon have seven locations and plans to reach 20 by next year. IWG now has four locations that compete directly with WeWork and other providers are setting up shop.
The scarcity of space has underpinned real estate development in the city, where 17 office buildings are currently under construction, including two skyscrapers that will each add one million square feet. Tech companies such as Shopify and Microsoft are responsible for preleasing a significant amount of space in the new buildings.
The tight Toronto market, along with robust demand for office space in Vancouver and Montreal, helped push the national office vacancy rate to 11.5 per cent, its lowest level in four years, CBRE said.
In Vancouver, the rate fell to 2.7 per cent from 3.8 per cent in the previous quarter. In Montreal, the level declined to 8.6 per cent from 9.4 per cent, according to the report.
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