Toronto Office Market Report
Despite Downtown Toronto office vacancy hitting a 24-year historic high of 15.3% after the first nine months of 2024, sublease vacancy in class A/B buildings appears to have stabilized. Downtown South and the Financial Core are benefiting from proximity to Union Station as tenants locate close to the city’s key public transit hub amid the downtown’s ongoing congestion issues. As absorption improved quarter-over-quarter in Downtown North and South and in the Financial Core, further deterioration in Downtown West and East points to a challenging 2025. Third-quarter 2024 recorded a rebound in leasing activity after a weak second quarter in terms of total square footage leased downtown, setting a solid base for the market to build upon in 2025. Office leasing activity during the first nine months of 2024 showed some recovery in the Financial Core and Downtown North, but average deal sizes remained smaller than average with large requirements limited in any submarket. Model suites of all sizes, particularly in well-located and recently constructed class A premises in Downtown South and the Financial Core, are leased up quickly by tenants seeking flexibility and to avoid delays and fit-out costs. Smaller deals are increasingly comprising more of the deal flow in Downtown Toronto as large floorplate users such as tech firms remain silent in terms of committing to any new significant lease obligations in new or existing buildings. While Downtown Toronto’s construction pipeline continues to churn out new supply, including the delivery of Portland Commons in the third quarter of 2024, the amount of new space under construction has dwindled to ~2 msf, the lowest in years. While class A rents are rising throughout downtown, tenant inducements tend to be greater outside the Financial Core and Downtown South, particularly for warm shell space. Rents for class B/C space remain flat with even better inducements on offer.
Download Toronto Office Market Report 3Q24Toronto Industrial Market Report
GTA industrial vacancy rose to 3.0% at the third quarter of 2024, the most vacancy recorded in the GTA since mid-2015. Regional vacancy was less than 2% from mid-2017 through 2023. GTA industrial leasing in the first nine months of 2024 has been muted, consisting mainly of renewals with modifications, highlighting the new importance of a renewal strategy. Sublease space availability spiked to its highest level since 2016 at the third quarter of 2024 as tenants right-size requirements and limit speculative growth with an eye on the economy. Tenants typically have the upper hand when it comes to negotiating with landlords with concessions at their highest point since before the pandemic arrived in early 2020. Halton had the highest industrial vacancy rate in the GTA at 6.1%, followed by Durham (5.1%) and Peel (3.2%). York was the tightest submarket (1.8%) followed by Toronto at 2.0%. Slightly less than 9.1 msf was under construction in the GTA at the third quarter of 2024, a notable decline from the 16.4 msf under construction after the first nine months of 2023. Estimated asking rates for industrial space peaked at mid-2023 and has been in decline since, slipping 5.8% overall with rents in Peel and Halton declining the most in the past 12 months. Peel led the GTA market in terms of sublease space availability at the third quarter of 2024, growing to 3.9 msf from slightly less than 1.7 msf just 12 months earlier. Sale proceeds of $4.1B for GTA industrial assets in the first nine months of 2024 were the fourth highest in history following the same period in 2021 ($5.5B), 2022 ($5.5B) and 2023 ($8.2B).
Download Toronto Industrial Market Report 3Q24
