Oxford Properties Group Inc. is going to build a 40-storey office tower at 100 Adelaide Street West in Toronto's financial district, on land that it has owned for more than a decade.
The decision to finally go forward with the project, after searching for tenants for more than a year, is the latest sign of a resurgence of interest among developers in the downtown office market. And with the area now becoming home to a number of new towers, the older bank buildings that have long dominated Toronto's skyline must work harder to compete for tenants.
The new building will be named the Ernst & Young Tower and has attracted two high-profile financial tenants – E&Y and the TMX Group – that currently occupy a lot of space in older towers nearby.
"Ernst & Young is leaving one of the original bank towers," Michael Kitt, executive vice president of Oxford, which also has ownership stakes in older office buildings, said in an interview. "The vacancy rate for new buildings, less than ten years old, is under two per cent downtown, whereas the rate for the rest of the buildings would be closer to five. So tenants really do appreciate the benefits of new space."
He rattled off a list of features that new buildings have that are appealing: air quality, lighting controls bike rooms, change rooms, showers, high ceilings.
"As we have grown and diversified our organization, our efforts to integrate our acquisitions and optimize synergies have made clear the importance of a work space that fosters innovation and teamwork," TMX Group vice president Michael Vivaldi stated in a press release.
Toronto went through a period of almost twenty years during which it saw very little supply of new skyscrapers. But low borrowing costs and vacancy rates have been spurring developers on of late. Brookfield Office Properties Inc. is now constructing a second tower at its Bay Adelaide Centre, anchored by Deloitte.
"The Ernst &Young Tower along with Bay-Adelaide have been a barometer, and the fact that now all three buildings will be completed really shows the health of the Toronto office market and the demand from tenants for new quality office space," Mr. Kitt said.