Vacancy rates in Toronto’s office market rose in the second quarter but fell in certain areas, according to a new report.
On Monday, Avison Young released its second quarter report on Toronto’s office market, which found that the overall availability rate increased by 70 basis points to 20.2 per cent during the quarter, an increase of 140 basis points annually. The office vacancy rate also increased by 30 basis points compared to the previous quarter and 130 basis points annually to 14 per cent.
“Although overall vacancy across the GTA increased during the second quarter, the trend was not evenly distributed across all markets. In fact, vacancy ticked down slightly in the Midtown (-70 bps), Toronto East (-20 bps) and Toronto North (-40 bps) markets, while it rose in Downtown (+70 bps) and Toronto West (+20 bps),” the report said.
During the quarter, the report highlighted that market gains for class A and trophy buildings were “nearly offset” by losses in class B and C buildings.
The average asking net rental rates for office space ticked higher during the quarter across all available space, at $27.3 per square foot, according to the report.
“However, the change did not appear uniformly across geographies and building classes,” the report said.
“The Downtown and Midtown markets posted rising rates, while Toronto West held steady and Toronto North and East each inched downward.”
Office space replacement?
The report also highlighted that potential changes to Toronto’s office regulations could impact the market. According to the report, the City of Toronto’s Planning and Housing Committee presented a report on July 11 regarding new policies for replacing office space.
The city will now “run a stakeholder engagement process” to create new recommendations or amendments to regulations on office space, the report said.
“If the city relaxes its existing policy requiring replacement of office space as part of redevelopment projects in certain areas, the result could be a reduction in the market’s overall office inventory as some buildings…- could become candidates for demolition, and redevelopments would not necessarily include the same amount of office space,” the report said.