Toronto Office Market Report
As Downtown Toronto office vacancy hit 14.9% at year-end 2024 - the second highest vacancy recorded since 2000 - it also marked the first quarter-over-quarter decline in vacancy since 2019. Annual absorption swung positive in 2024 as overall vacancy and absorption declined at year’s end, a sign that Downtown Toronto’s office market may be stabilizing heading into 2025. While leasing activity in the Financial Core has returned to pre-COVID peaks, vacancy remained elevated. This suggests that stabilization occurred as tenant right-sizing completed in 2024. Slower job growth is limiting improvements in office utilization by downtown tenants, which is translating into weaker organic leasing growth even in popular downtown submarkets. Tenants are still seeking out model suites of all sizes, particularly in well-located and recently constructed class A premises in Downtown South and the Financial Core with landlords increasingly accepting the fit-out costs to lease the space. Elevated vacancy that remained downtown in 2024 despite the return of leasing velocity was increasingly the result of rising amounts of backfill space that is not being occupied due to much of it being in obsolete office space in unpopular areas. Renewals and deals in new or near-new space remain key leasing drivers in Downtown Toronto, particularly in the Financial District and Downtown South submarkets, as tenants flock to recently constructed, highly amenitized buildings. While the vacant delivery of Portland Commons in late 2024 pushed up vacancy in Downtown West, the amount of new space under construction downtown has dwindled to ~2.2 msf, leading to at least one new large project being considered. With class A rents diverging more from class B/C rents downtown, more tenant inducements tend to be needed, particularly outside the Financial Core and Downtown South. Rents for class B/C space are flat but showing signs of softening.
Download Toronto Industrial 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).
