Toronto Office Market Report
Despite Downtown Toronto office vacancy hitting a 24-year historic high of 13.8% at first-quarter 2024, sublease vacancy has been tightening since mid-2023. While delivery of new supply Downtown since 2020 contributed to a rise in vacancy and availability, it has also obscured the superior performance of class A assets. Apart from Downtown West, class A office vacancy had either stabilized or declined at the end of the first quarter of 2024 in all other Downtown Toronto submarkets. Positive absorption in the Financial Core and Downtown South in first-quarter 2024 offset the moderating negative absorption recorded in the other Downtown submarkets. Office leasing activity has started picking up, particularly in the Financial Core, among smaller professional services groups who have emerged post-COVID and are now slowly returning to the office. Tenants are increasingly interested in built-out spaces that are ready for occupancy without the expense and time typically needed for tenant improvements (TIs), which is leading to competitive leasing situations. Landlord flexibility has been key to Downtown Toronto remaining a tenants’ market at first-quarter 2024, particularly in class B/C premises, although rental rates have largely remained stable in class A properties thanks to generous TIs. Natural lease expirations are increasingly contributing to a resumption in leasing activity as organizations are forced into making a decision and considering what a return to office looks like and how much space is required. Downtown Toronto continues to face challenges related to traffic congestion and safety concerns on public transit that has led many office workers to cite their commute as an impediment to returning to the office more regularly.
Download Toronto Office Market Report 1Q24
