At least three million square feet of new office space in central Toronto could be announced by the end of this year, as the commercial real-estate sector wonders how long the perfect blend of hot demand and new development can last.
Stuart Barron, national research director at Cushman & Wakefield in Toronto, speculates that two or three announcements for major new developments in the city, comprising between three and three-and-a-half million square feet of office space, are likely by year's end.
It's a blend of optimism and caution in an industry striving to predict how long the good times will last.
Over the past three-and-a-half years, average absorption of office property has been an exuberant 300,000 square feet each quarter, producing dramatically low vacancy rates and record levels of new developments. Mr. Barron said 50 per cent of that absorption has been in Toronto's downtown South Core, an emerging district squeezed between the city's major east-west rail lines and Lake Ontario.
The South Core remains so hot that Cadillac Fairview anounced this month that it is developing a new 32-storey office tower, with 879,000 square feet at 16 York St., on speculation – that is, without securing a major tenant beforehand.
Such a move is rare but the York Street tower is seen as a sure bet. The building, scheduled for completion in June of 2020, will be just one block from the downtown's central commuter hub, Union Station. Anticipation is that Toronto's urban core will remain a tight market.
Still, a lot can happen when 16 York and other new buildings announced this year actually open in three years' time.
"It's not normal to have an expansionary period of this length. We have seen a very strong office growth environment since basically mid-2009," he said. "That's a very long period, and there are always risks, particularly when you're bringing such a significant amount of space to market.
"So, I wouldn't say anything is a given. If it was a given, you'd probably see 10 announcements this year," he added.