q1 2016 cresa market report

The

Tenant’s

Perspective

GREATER TORONTO AREAOFFICE MARKET REPORTQ1 2016

CRESA TORONTO INC., BROKERAGE

170 University Avenue

Suite 1100

Toronto, ON M5H 3B3

416.862.2666

Connect with us and get up-to-date information:

@CresaToronto cresa.com/toronto

https://twitter.com/CresaToronto

http://www.cresa.com/toronto

Table of Contents

3 GTA

5 Downtown Toronto

7 Midtown Toronto

9 GTA North

11 GTA East

13 GTA West

15 About Cresa

DISCLAIMER

The information contained herein was obtained from sources which we deem reliable and, while thought to be

correct, is not guaranteed by Cresa Toronto Inc., Brokerage. Acknowledgement: Data for graphs, charts and

tables used in this report are sourced from Cresa Toronto Inc., Brokerage and CoStar. Some of the data in this

report has been gathered from third party sources and has not been independently verified by Cresa Toronto

Inc., Brokerage. Cresa Toronto Inc., Brokerage makes no warranties or representations as to the completeness

or accuracy thereof.

GTAMARKET UPDATE

AVAILABILITY2015

Q4

2016

Q1

Midtown Toronto 6.6% 7.0%

Downtown Toronto 8.2% 8.8%

GTA North 8.6% 7.3%

GTA East 10.0% 10.4%

GTA West 14.7% 14.6%

OVERALL 9.8% 9.9%

While all five major nodes across the GTA experienced positive absorption in Q1, the vacancy rate remained unchanged at 7.2% for the third consecutive quarter. This was due to the overall absorption of 1,806,111 SF being offset by 1,734,200 SF of new supply that was added to the market.

After the delivery of Bay Adelaide East in the Down-town Node, the amount of space under construction decreased to 4,722,179 SF, the lowest it has been in the last 3 years. Just over 3.1 million square feet of this space is scheduled to be delivered to the market over the balance of the year, which will put considerable up-ward pressure on vacancy rates. There are a number of ‘proposed’ buildings, especially in tighter markets such as Downtown West, that will likely transition to ‘under construction’ over the next couple of quarters as larger tenants in these markets do not have a significant num-ber of options in existing buildings that can accommo-date their needs.

At 14.6%, Toronto West continues to have the highest availability rate across the GTA while Toronto East ex-hibits the second highest availability rate. Tenants with-in these nodes are in a good position as they will have a number of options to choose from and landlords are offering aggressive inducement packages in order to compete and attract new tenants.

The most notable investment transaction in Q1 was Crown Realty Partners and Crestpoint Real Estate Investments joint purchase of the Allstate Corporate Centre in Markham. The 575,000 square foot complex was 93% leased and the purchase price of $148.55 million represented a cap rate of approximately 6.5%.

DISTRIBUTION OF AVAILABILITY

TENANT’S PERSPECTIVE

• As the availability rate across the GTA approaches 10%, most tenants will find that they have many options when looking for space and aggressive landlords that will compete for good tenancies

• Some subnodes, such as Downtown West, cannot accommodate larger users except in ‘proposed’ buildings

Squ

are

Feet

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

Downtown Midtown TorontoNorth

Toronto East TorontoWest

Class A Class B Class C

MARKET TRENDS

SIGNIFICANT AVAILABILITIES

04. 315 Front Street W

326,560 SF

07. 2200-2206 Eglinton Ave E

254,235 SF

06. 222 Bay Street

271,905 SF

08. 181 Bay Street

246,179 SF

01. 1150 Eglinton Ave E

403,981 SF

02. 661 University Ave

398,820 SF

03. 40 King Street W

339,054 SF

NOTABLE LEASE TRANSACTIONS

RBC Financial Core 185,733 SF

Capital One Consumers 42,584 SF

Fresenius Kabi ACC/Airport 25,600 SF

BMO Outer Financial Core 22,907 SF

The Ian Martin Group Oakville 22,340 SF

NOTABLE SALE TRANSACTIONS

11/15/17/27 Allstate

Parkway & 80

Frontenac Drive

1,018,087 SF $148,600,000 $146 PSF

1200 Bay Street 120,989 SF $86,750,000 $717 PSF

1 St. Clair Avenue E 81,694 SF $35,000,000 $428 PSF

381-387 Richmond

Street E 44,871 SF $26,000,000 $579 PSF

1100 Burloak Drive 472,973 SF $64,750,000 $137 PSF

363 Adelaide Street E 2,000 SF $1,479,000 $740 PSF

75 International Blvd 89,559 SF $8,500,000 $95 PSF

UNDER CONSTRUCTIONW Completion

1 1 York Street Sep 2016

2 351 King Street East Oct 2016

3 Bay Adelaide East Jun 2017

05. 22 Adelaide Street W

299,701 SF

Vaca

ncy

Rat

e

Squ

are

Feet

Forecast

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Deliveries Absorption Vacancy

Downtown

TorontoMARKET UPDATE

AVAILABILITY Q2 Q3

Financial Core 10.90% 11.90%

Outer Financial Core 7.70% 7.00%

Downtown North 6.20% 6.40%

Downtown South 6.20% 18.10%

Downtown East 6.10% 4.80%

Downtown West 6.80% 6.70%

King/Dufferin 10.30% 8.00%

OVERALL 8.60% 9.40%

Downtown Toronto continues to be the hub of ac-

tivity for the GTA, reporting a positive absorption of

453,341 square feet and 178 leasing deals. The

construction pipeline remains healthy with 9 build-

ings and 4.3 million square feet under construction.

The latest quarter continues to see an increase in

gross rent up $0.47 PSF, which has been the trend

over the last 2 years.

Surprisingly, of the seven subnodes in Downtown

Toronto, the Financial Core is suffering from the larg-

est availability rate of 10.9% surpassing that of the

overall GTA which sits at 9.9%. This availability is

focused on the larger AAA bank towers within the

Core, which is in desperate competition with newer

A class assets within the Financial and South core.

As the trend to migrate to Downtown continues, the

positive absorption trend will also likely continue at

the detriment of the suburban office market. This

does not necessarily indicate that the new supply

will be fully absorbed and there will likely be an up-

tick in vacancy rates downtown as buildings come

to completion.


• New supply will continue to push landlords to compete for larger tenants with strong covenants

• Downtown West and Downtown East supply remains tight as strong demand of brick and beam assets continues

• Great opportunities available in AAA class assets within the Financial Core


Page 5

Downtown

Toronto

AVAILABILITY2015

Q4

2016

Q1

Financial Core 10.1% 10.7%

Outer Financial Core 5.8% 5.7%

Downtown North 6.3% 6.6%

Downtown South 10.5% 13.1%

Downtown East 5.2% 4.5%

Downtown West 6.1% 6.3%

King/Dufferin 6.4% 7.2%

OVERALL 8.2% 8.8%

Despite 578,033 SF of positive absorption in Q1, Avail-

ability and Vacancy in the Downtown node remained

relatively flat with only a 0.6% increase in availabili-

ty and a 0.4% increase in vacancy. This was mainly

attributable to the delivery of the 1,048,319 SF Bay

Adelaide Centre.

Downtown East supply remains extremely tight with

only 4.5% of available space despite the expected de-

livery of 351 King Street East in October, which still

has 50,000 SF of available space, representing 25%

of the subnodes entire availability.

Allied Properties REIT is taking advantage of the lim-

ited supply of large blocks in Downtown West by ac-

tively pursuing new development and intensification

projects such as 620 King Street West, the King Port-

land Centre, where Shopify will occupy 44% of the

project, and THE WELL project which is a mixed use

community to be located at the north west corner of

Front Street West and Spadina Avenue.

As expected, Downtown was the leader in the number

and size of transactions in Q1, which resulted in the

highest positive absorption across the GTA. Tenants

are continuing to look at Downtown for its access to a

young, talented labour pool that is becoming harder to

find in the suburban markets.


• Leasing activity remains healthy Downtown with strong demand for Downtown East and Downtown West assets

• Older Class A buildings continue to find it difficult to compete against new construction


MARKET UPDATE

0

50

100

150

200

250

0-5k 5-10k 10-20K 20-50K 50K+


Squ

are

Feet

MARKET TRENDS


01. 661 University Ave

398,820 SF


339,054 SF


RBC Financial Core 185,733 SF

Labatt Downtown South 60,000 SF

Sunlife Financial Downtown South 53,456 SF

Nike Downtown West 22,979 SF

BMO Outer Financial Core 22,907 SF


381-387 Richmond

Street East 44,871 SF $26,000,000 $579 PSF

363 Adelaide Street

East 2,000 SF $1,479,000 $740 PSF

103 Church Street 19,599 SF $7,000,000 $357 PSF

59 Mutual Street 7,412 SF $8,500,000 $1,147 PSF

UNDER CONSTRUCTION

Completion

1 1 York Street Sep 2016

2 130 Queens Quay Sep 2016

3 351 King Street East Oct 2016

4 20 Wellington Street East Jun 2017

5 100 Adelaide Street West Jun 2017

08. 320 Bay Street

215,958 SF

04. 22 Adelaide Street W

299,701 SF

03. 315 Front Street W

326,560 SF


240,024 SF

05. 222 Bay Street

271,905 SF

06. 181 Bay Street

246,179 SF

Vaca

ncy

Rat

e

Squ

are

Feet

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Q3 2

013

Q4 2

013

Q1 2

014

Q2 2

014

Q3 2

014

Q4 2

014

Q1 2

015

Q2 2

015

Q3 2

015

Q4 2

015

Q1 2

016

Q2 2

016

Q3 2

016

Q4 2

016


Forecast

Midtown

AVAILABILITY2015

Q4

2016

Q1

Bloor 5.2% 5.7%

St. Clair 6.0% 5.4%

Eglinton 10.0% 10.7%

OVERALL 6.6% 7.0%

The Bloor and St. Clair nodes have traditionally been

an area of limited availability, due primarily to very

limited inventory as well being located in an area of

easy accessibility. This continues to hold true with

availability rates for Bloor and St. Clair subnodes be-

ing 5.7% and 5.4% respectively. The Eglinton market

has a greater amount of availability as compared to

its midtown counterparts with 10.7%, however, the

Eglinton node will increasingly become more attrac-

tive as the Eglinton Crosstown line nears completion.

With a projected completion date of 2020, we can

expect proposed developments to start construction

in 2017/2018. Currently, there are three proposed

buildings that will add 733,000 SF of inventory.

Slate Asset Management recently acquired 1 St Clair

Avenue East from Scotiabank, the latest piece of an

office-tower portfolio that gives the firm ownership

of all four corners of Yonge and St Clair. Slate pre-

viously aquired 1 St. Clair Avenue West from Evton

Capital Partners, and 2 St. Clair Avenue East and

2 St. Clair Avenue West from GE. Slate`s goal is to

revitalize an aging intersection including moderniza-

tion of building entrances, lobbies, retail podium and

facades.

Overall the Midtown node was very active in Q1 and

experienced positive absorption of 187,849 SF, its

the largest increase in the last 3 years.


• Slate continues to monopolize the St. Clair node with its eye on revitalizing the area

• St. Clair and Bloor subnodes continue to have limited availability, leaving few options for tenants


MARKET UPDATE

0

10

20

30

40

50

60

70

80

90

100

0-5k 5-10k 10-20K 20-50K 50K+

Midtown Class A Midtown Class B Midtown Class C

Toronto

MARKET TRENDS


07. 20 Eglinton Avenue W

60,865 SF

06. 2 Bloor Street W

66,539 SF


87,847 SF


60,479 SF

01. 2 St. Clair Avenue W

119,849 SF

02. 2300 Yonge Street

108,297 SF

04. 7 St. Thomas Street

93,948 SF

03. 50 Charles Street E

99,000 SF


Turner & Townsend St. Clair 10,000 SF

Strategic/Ampersand Bloor 5,159 SF

Consulate General of Spain Bloor 5,063 SF

World Society for the

Protection of AnimalsEglinton 3,809 SF


1 St. Clair Avenue East 81,694 SF $35,000,000 $428 PSF

1200 Bay Street 120,989 SF $86,750,000 $717 PSF

UNDER CONSTRUCTION

Completion

1 2300 Yonge Street (Addition) Mar 2016

2 7 St. Thomas Street Sep 2016

3 50 Charles Street East Dec 2016

Vaca

ncy

Rat

e

Squ

are

Feet

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

200,000

250,000

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016


Forecast

AVAILABILITY2015

Q4

2016

Q1

North Toronto Region 10.5% 9.8%

North Yonge Corridor 8.7% 8.3%

Vaughan 9.0% 8.6%

North York West 8.1% 4.8%

OVERALL 8.6% 7.6%

The Toronto North node experienced its third consecu-

tive quarter of positive absorption with 197,000 SF in Q1

2016. Availability rates dropped a full percentage point

to 7.6% to end the quarter.

As part of the Vaughan Metropolitan Centre (VMC) 442

acre redevelopment, Vaughan introduced the KPMG

Tower with 365,000 SF of which 200,000 SF is still avail-

able for lease. Currently, there are two other buildings

under construction, 7777 Weston Road and 1275 Finch

Avenue West for a total 300,000 SF. Vaughan continues

to push its work, live, play agenda.

The North Yonge Corridor, which runs along Yonge

street and extends from York Mills Road/Wilson Avenue

north to Steeles Avenue, accounted for 94,889 SF of the

197,000 SF of positive absorption for the node. Leasing

activity was as its highest level in the last two years, as

the gross rental rate inched up for the second consecu-

tive quarter to $40.02 PSF from $39.81 PSF.

Overall, Toronto North is a well balanced market which

has averaged quarterly absorption of 40,000 SF over

the last few years, with availability rates just below that

of the GTA average. It is expected that activity will pick

up with the completion of the TTC subway station at

Highway 7 and Highway 400, expected for late 2017.


• Development of Vaughan Metropolitan Centre (VMC) is creating a suburban opportunity to ‘work, live, play’

• Toronto North is becoming more accessible than ever with the introduction of the Spadina TTC subway extension


GTA

NorthMARKET UPDATE

0

20

40

60

80

100

120

0-5k 5-10k 10-20K 20-50K 50K+


MARKET TRENDS



80,833 SF


43,665 SF


58,573 SF

01. KPMG Tower

198,820 SF


144,002 SF


128,292 SF


52,552 SF

05. 100 Sheppard Ave E

78,239 SF

UNDER CONSTRUCTION

Completion

1 35 Tangiers Road Jun 2016

2 7777 Weston Road Sep 2016Va

canc

y R

ate

Squ

are

Feet

* No Notable Lease Transactions

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

-100,000

-50,000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016


Forecast



250 Canarctic Drive West

27,494 SF $3,150,000 $115 PSF

AVAILABILITY2015

Q4

2016

Q1

Consumers 16.0% 15.3%

DVP North/Duncan Mill 7.4% 2.8%

DVP South/Don Mills/Eglinton 14.8% 15.1%

East Toronto Region 5.7% 5.7%

Gordon Baker/Victoria Park 8.7% 9.4%

Markham/Richmond Hill 9.8% 9.8%

Scarborough 7.7% 12.7%

South East Toronto Region 11.6% 10.3%

Steeles/Woodbine 9.8% 9.0%

OVERALL 10.4% 10.5%

The Toronto East node witnessed a drop in vacancy

dipping to 8.4% versus 9.0% from the previous quar-

ter. This was mainly attributed to the strongest quar-

terly absorption in over a year with 270,313 SF and

a lack of new deliveries in Q1 2016. Construction

activity is slow with only 4 properties and 483,925

SF currently underway. Delivery of the Aviva building

at 7980 Birchmount Road in Markham is expected

in April, adding 370,000 SF, with 81,000 SF still avail-

able to the market.

The struggling Consumers Road node received

some attention with Capital One signing a 42,584

SF lease for their call centre operations. This trans-

action helped lower the availability rate from 16.0%

to 15.3%. Despite the transaction, the Consumers

Road node still has significant availabilities in Atria II,

235 Yorkland Blvd and 251, 255 and 250 Consumers

Road, all with availabilities greater than 25%.

DVP South/Don Mills/Eglinton continues to be an

area of heavy competition with an availability rate

of 15.1%, which is up slightly from 14.8% from the

previous quarter. There is currently no new devel-

opment under construction and there has not been

since Q1 2015.


• Landlords in the Consumers Road node offering very aggressive packages for Tenants of all sizes

• Despite proximity to Highway 401 and Sheppard Subway line, demand remains relatively muted for the Consumers Road node


GTA

EastMARKET UPDATE

0

50

100

150

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250

0-5k 5-10k 10-20K 20-50K 50K+


MARKET TRENDS


07. 169 Enterprise Ave

85,800 SF

06 789 Don Mills Rd

87,259 SF

05. 2235 Sheppard Ave E

90,886 SF

01. 1150 Eglinton Ave E

403,981 SF

08. 111 Gordon Baker Rd

82,262 SF

04. 101 McNabb St

154,000 SF

03. 1-3 Concorde Gate

164,943 SF


Capital One Consumers 42,584 SF

Reliance Home Comfort Consumers 37,000 SF

Everlink Payment Services Markham/Richmond Hill 17,905 SF

MarketplaceDVP South/Don Mills/

Eglinton4,718 SF


Allstate Corporate Centre & 80 Frontenac Drive

101,809 SF $14,860,000 $146 PSF

75 Commerce Valley

Drive East 81,290 SF $12,100,000 $149 PSF

UNDER CONSTRUCTIONCompletion

1 7980 Birchmount Road Apr 2016

2 Hwy 7 & South Park Road Sep 2016

3 2201 Markham Road Oct 2016

4 833 Passmore Avenue Dec 2016

5 300 Silver Star Boulevard Dec 2016

Vaca

ncy

Rat

e

Squ

are

Feet

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

-400,000

-300,000

-200,000

-100,000

0

100,000

200,000

300,000

400,000

500,000

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016


Forecast

02. 2200-2206 Eglinton Ave E

254,235 SF

GTA

West

AVAILABILITY2015

Q4

2016

Q1

427 Corridor/Bloor/Islington 19.5% 20.1%

Airport Corporate Centre/Airport 19.7% 19.8%

Brampton 8.4% 10.2%

Burlington 14.4% 14.5%

Mississauga City Centre 15.8% 14.6%

Hwy 10/Hwy 401 11.5% 12.4%

Meadowvale 19.4% 18.5%

Mississauga South 6.7% 7.2%

Oakville 14.1% 14.4%

West Toronto Region 8.1% 7.3%

OVERALL 14.8% 14.7%

The Toronto West node continues to suffer from the

highest overall availability and vacancy rates in the

GTA of 14.7% and 11.6% respectively. The Class A

assets have the highest availability at 18% forcing

inducements to attract tenants. This has resulted in

248,934 SF of positive absorption to kick off 2016 re-

sulting in the highest quarterly absorption over the last

2 years.

Despite the high availability rate, Toronto West still has

a number of projects under construction slated for

completion this year, totalling 613,000 SF. 5 of the 8

buildings are located on Speers Road in Oakville and

account for 240,000 SF.

LaSalle Investment Management completed the pur-

chase of the Burloak Towers for $64,750,000, which

includes a portfolio of four office buildings in Burling-

ton. The 435,000 SF complex comprised of 1100 Bur-

loak Drive and 5575, 5515 and 5420 North Service

Road is 83% leased to tenants that include a variety of

large financial, pharma and technology companies. It

is expected that LaSalle Investment Management will

introduce a number of capital improvements including

modernization of lobbies and new roofs among other

upgrades.


• Tenants continue to have many options throughout most subnodes in Toronto West

• Landlords continue to entice Tenants with large inducement packages


MARKET UPDATE

0

50

100

150

200

250

300

350

0-5k 5-10k 10-20K 20-50K 50K+


MARKET TRENDS


01. 5015 Spectrum Way - 2

235,000 SF

02. 501 Alliance Ave

226,118 SF


Fresenius Kabi ACC/Airport 25,600 SF

The Ian Martin Group Oakville 22,340 SF

EMC Corporation ACC 14,233 SF

Bioscript Solutions Oakville 9,595 SF


5420/5575/5515 N

Service Road & 110

Burloak Drive

472,973 SF $64,750,000 $137 PSF

2010 Winston Park

Drive 79,131 SF $19,725,000 $249 PSF

375-385 The West Mall 50,000 SF $10,000,000 $200 PSF

75 International Blvd 89,559 SF $8,500,000 $95 PSF

UNDER CONSTRUCTION

Completion

1 235 Speers Road - Building 3 & 4 April 2016

2 235 Speers Road - Building 1 & 2 May 2016

3 55-71 Speers Road May 2016

4 255 Longside Drive May 2016

5 2727 Meadowpine Boulevard Jul 2016

04. 2727 Meadowpine Blvd

150,000 SF

03. 2201 Bristol Circle

208,380 SF

05. 6875 Financial Drive

125,786 SF

06. 5015 Spectrum Way - 1

125,000 SF

07. 2455 Meadowpine Blvd

114,760 SF

08. 6715 Airport Road

112,537 SF

Vaca

ncy

Rat

e

Squ

are

Feet

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016


Forecast

About

Cresa

Cresa provides customized solutions exclusively for corporate

space users by offering fully integrated services that align real

estate needs with business objectives, delivering maximum cost

savings and exceeding expectations.

Michael Wasyliw

Principal, Sales [email protected]

FOR FURTHER INFORMATION CONTACT:

Hafiz Abdulla

Advisor, Finance and [email protected]

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