Toronto Real Estate Board (TREB) Commercial Division Members reported lease transactions accounting for almost 3.5 million square feet of industrial, commercial/retail and office space during the Third Quarter of 2012, down from slightly more than 3.7 million square feet leased in the Third Quarter of 2011.
The year-over-year change in average lease rates was mixed. Based on transactions for which pricing was disclosed, the average industrial lease rate was up compared to last year whereas average commercial/retail and office lease rates were down.
“The industrial market segment accounted for almost three-quarters of total leased space in the Third Quarter. Average lease rates were up for all industrial size categories reported by TREB. If growth in average industrial lease rates continues in the Fourth Quarter and into 2013, it would suggest that market conditions are tightening with industrial firms in southern Ontario more confident about future growth,” said TREB Commercial Division Chair Cynthia Lai.
Commercial Division Members reported 214 combined commercial sales in the Third Quarter – down 18 per cent from 262 sales during the same period in 2011. The average selling price was down for all three categories, but a comparison of transactions suggests that the decline was more the result of a different mix of property types sold this year compared to last, especially in relation to commercial/retail and office space.
“The mix of sold office space shifted towards larger properties in the Third Quarter of this year. Generally speaking, larger office properties are associated with a lower price per square. As a result, when larger properties account for a greater proportion of total transactions the overall average lease rate tends to dip, all else being equal,” said Lai.
“The dip in the in the average commercial/retail sale price was also driven by sales of larger properties. Last year the mix and use of larger commercial/retail properties sold dictated a higher price compared to this year. For transactions in smaller size categories, average selling prices were more comparable between 2012 and 2011,” continued Lai.