The GTA office market is expected to experience a slower than average growth over the next six months, mainly as the finance, insurance, real-estate and commercial services sectors digest the impact caused by the global credit crunch and weakening economy south of the border, according to a Colliers International report.
The semi-annual study, Colliers International Office Market Report & Forecast predicts that in the short-term the combination of slower economic growth and an influx of new office space supply will push the current average Vacancy Rate upwards from five to seven per cent with a moderate average Asking Rent decrease in the range of one to two per cent per quarter from the current rate of $18.07 to $17.11 per square foot (sqf) by the end of 2009. Recovery is anticipated by the first half of 2010 as vacancy levels are expected to decline and rent rates to increase (6.2 per cent and $17.26 respectively).
“Two main factors impact the GTA office market performance in the short-term: length and depth of the global economic downturn and the time it will take for the local market, mainly in the downtown core, to absorb the new office space expected to be delivered in 2009 and 2010,” says Ian MacCulloch, Canadian vice-president of research with Colliers International. “And although a softer sentiment is expected in the short-term, the economic parameters still indicate this is a landlord’s market and tenants who are looking into reviewing or renewing their leasing agreements in the near future should take these factors and trends into account.”
The industrial real estate market in the GTA seemed immune to the manufacturing crisis which has hit Ontario over the past year thanks to its reliance on shipping and moving of goods versus actual manufacturing of products. According to the Colliers International Industrial Market Report & Forecast, the Average Net Asking Rent will remain steady with a slight increase from the current $5.70 to $5.72 over the short-term while Availability Rate continues to hover around the four to six per cent levels.
Downtown – The large block of new office space expected to be delivered in 2009-2010 will create pressure on Asking Rent prices and an increase in Vacancy Rates. Colliers expects a steady market until the end of 2008 with a projected climb in vacancy in the range of 6.5 per cent to seven per cent, pushing Asking Rent from today’s $24 per sqf. towards the $20 per sqf. levels.
Midtown and North Markets GTA’s mid- and North town markets are expected to remain stable with solid demand and no significant swings. Vacancy rate for the midtown market is expected to be within the 4.7 to 5.1 per cent range, with Asking Rent at 16.5 per cent and $17.20 per sqf. The office market North of Toronto is expected experience solid demand with a projected Asking Rate of just under $15.00 per sqf. Increase in demand and Asking Rent is expected to resume at the second half of 2009.
Mississauga continues to lead the submarkets in terms of new supply with over two million sqf currently under construction.
Richmond Hill remains the market leader with the most expensive rents at $7.26 per sqf.