Q4 2010 GTA Office Report DTZ Barnicke
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DESCRIPTIONQ4 2010 Greater Toronto Area Office Report. Profiles changes in vacancy rates, office rental rates and changes in absorption for Toronto.
Although the information contained within is from sources believed to be reliable, no warranty or representation is made as to its accuracy being subject to errors, omissions, conditions, prior lease, withdrawal, or other changes without notice and same should not be relied upon without independent verification. DTZ Barnicke Limited, Real Estate Brokerage 20111
Demand for office space slowed in Q4 2010 in the Greater Toronto Area (GTA) resulting in negative absorption of 788,316 square feet.
The GTA vacancy rate increased by 76 basis points to 8.5% after fluctuating between 7.9% and 8.8% earlier this year.
Maple Leaf Square located in Downtown South was the only building completed in Toronto during the fourth quarter. The building was 100% leased upon completion and therefore, did not affect the vacancy rate in the market.
Approximately 1,371,593 square feet of office space is under construction in the GTA including: 18 York Street in the Downtown South node and 610 Applewood Crescent, 6925 Century Avenue and 7125 Mississauga Road in the GTA West.
The percentage of direct versus sublet space remained unchanged this quarter at 82% direct space available and 18% sublet space available.
Overall average net asking rates in the GTA increased by $0.38 to $17.57 in Q4 2010 from $17.19 in Q3 2010.
Uptown North York achieved the lowest vacancy rate (3.6%) in the GTA, whereas the Dixon/Atwell node achieved the highest rate increasing again this quarter to 21.7% from 20.5% in Q3 2010.
Office Property MarketGreater Toronto Area
ContentsEconomic Overview 2GTA Overview 3- 5
Greater Toronto Area 6
Downtown 7 -12
Midtown 13 - 16
North Yonge Corridor 17 - 20
GTA North East 21 - 26
GTA West 27 - 40
ContactsWarren DSouzaResearch Manager+1 905 848 email@example.com
Sarah LamberskyResearch Manager+1 416 865 firstname.lastname@example.org
DTZ Barnicke2500-401 Bay StreetToronto, Ontario, Canada, M5H 2Y4
Tel: +1 416 863 1215Fax: +1 416 863 9555
Although the information contained within is from sources believed to be reliable, no warranty or representation is made as to its accuracy being subject to errors, omissions, conditions, prior lease, withdrawal, or other changes without notice and same should not be relied upon without independent verification. DTZ Barnicke Limited, Real Estate Brokerage 20112
Greater Toronto Area 6Downtown 7
Financial Core 8South 9West 10North 11East 12
Midtown 13Yonge / Bloor 14Yonge / St. Clair 15Yonge / Eglinton 16
North Yonge Corridor 17York Mills 18Downtown North York 19Uptown North York 20
GTA North East 21Don Mills / Eglinton 22DVP / 401 23Markham 24Richmond Hill 25Scarborough 26
GTA West 27427 Corridor 28Airport Strip 29Airport Corporate Centre 30Airport West 31Dixon & Attwell 32Mississauga City Centre 33Hurontario North 34Mississauga South 35Meadowvale 36Toronto West 37Brampton 38Oakville 39Burlington 40
Economic OverviewAfter reaching its pre-crisis peak in output, the Canadian economy will experience modest growth and see a return of demand in 2011 according to a Bank of Canada (BoC). A modest pattern of growth will be supported by an increase in business spending, job growth, improved U.S. economy visible by a return of private domestic demand, as well as an increase in foreign activity resulting from the Federal Reserves treasury purchase and extended stimulus package. Given this modest growth prediction, the BoC projects the Canadian economy to expand by 2.4% in 2011 and 2.8% in 2012.
Leading IndicatorsReal GDP slowed to 1.0% in Q3 2010 before gaining 0.4% in November which put the economy on track to achieve TD Economics' prediction of 2.3% GDP growth in Q4 2010. In contrast to early 2010, when real GDP reached 6.1% (Q1 2010) and 5.4% (Q2 2010), 2011 figures will be similar to GDP trends in the second half of 2010. The BoCs January Monetary Policy report revised its expectations upward that the Canadian economy will expand by 2.4% in 2011 and 2.8% in 2012, in contrast to its October Monetary Policy reports projections of 2.3% in 2011 and 2.6% in 2012.
Economic drivers in Canada included an increase in business investment, positive demand expectations for goods and services, an increase in consumer spending as well as an increase in household investment.
During the first six months of 2010, government and consumer spending were responsible for stimulating a significant proportion of the economy but going forward in 2011 as government spending winds down and household balance sheets continue to bring back in check, it will be an increase in foreign activity and domestic business investment that will contribute to GDP growth.
In Q4 2010, the BoC decided to maintain its target overnight rate at 1% after a of a percent increase in Q3 2010 extending favourable credit conditions to businesses and consumers alike. Despite low interest rates, since June 2010, housing starts have followed a downward trend. This quarter, housing starts fluctuated seeing a 13.3% decrease in December after an 18.2% jump in November.
Lagging IndicatorsThe unemployment rate in Canada held steady at 7.6% in Q4 2010 declining from 8.0% in Q3 2010. 22,000 new jobs were created in December while overall, 368,500 jobs were created in 2010.
Finally, according to the Bank of Canadas Business Outlook Winter Survey firms reported higher sales growth over the past 12 months in contrast to the previous 12 months. They also reported an easing of credit conditions and expected modest growth to businesses in 2011. Companies tied to commodity related businesses expressed optimism dues to strength in commodity prices.
TorontoTorontos unemployment rate kept pace with the national average and settled at 7.6% in December decreasing from 8.4% in November. Commercial permits also increased this quarter by 1.1% to 708 permits representing a value of $191.1 million.
Although the information contained within is from sources believed to be reliable, no warranty or representation is made as to its accuracy being subject to errors, omissions, conditions, prior lease, withdrawal, or other changes without notice and same should not be relied upon without independent verification. DTZ Barnicke Limited, Real Estate Brokerage 20113
Greater Toronto Area Overview
As 2010 comes to a close, demand across most markets in the Greater Toronto Area (GTA) slowed as the city experienced negative absorption in Q4 2010.
Of the 788,361 square feet of space not absorbed this quarter, the financial core, and GTA West saw the greatest amount of space brought back to market. However, despite the negative absorption overall, there were still pockets of growth includingDowntown South, Downtown West, the North York area, Markham as well as Mississauga South and Airport Corporate Centre.
In light of this quarters trends and absorption figure, the vacancy rate increased from 7.9% in Q3 2010 to 8.5% in Q4 2010. (Chart 1) On a whole, absorption still continues to outpace new office completions in Toronto, thereby signaling healthy demand.
Maple Leaf Square in Downtown South was completed this quarter adding approximated 225,000 square feet of space to the market however the building was 100% pre-leased and therefore did not affect the downtown cores vacancy rate.
Ten buildings remain under construction in the Downtown South and GTA West markets which will add an additional 1.4 million square feet of office space over the next three years.
In the GTA, the weighted average rental rate was stable this quarter as the vacancy rate for the city increased. (Chart 2) The Downtown Core commanded the highest average gross rental rate for Class A buildings at $58.35, an increase from $57.06 in Q3 2010. Burlington achieved the lowest average gross rental rate at $27.77 in comparison to Toronto Wests rate of $25.43 in Q3 2010. (Chart 3)
Chart 1 Chart 2
GTA Weighted Average Gross Rent
$0 $10 $20 $30 $40 $50 $60
Downtown Core $54.60Downtown South $48.16
Uptown North York $40.65Downtown West $39.81
York Mills $38.91St. Clair/Yonge $36.66
Bloor/Yonge $36.52Downtown North $36.49
Downtown North York $34.73Eglinton $33.40
Mississauga City Centre $32.97ACC $30.86
Oakville $30.15Downtown East $28.39
427 Corridor $27.99Meadowvale $27.57
Markham $27.52Scarborough $26.98
Richmond Hill $26.67DVP/401 $26.59
Toronto West $26.36Don Mills/Eglinton $25.59
Hurontario North $25.40Burlington $25.30
Airport Strip $25.22Dixon Rd. & Attwell $25.12
Mississauga South $24.20Brampton $22.59
Airport West $22.35
Gross Rent ($/sq ft)
GTA Supply vs. Demand
Building Completions Absorption
GTA Net Rent vs. Vacancy Rate
GTA Net Rent Vacancy Rate
Although the information contained within is from sources believed to be reliable, no warranty or representation is made as to its accuracy being subject to errors, omissions, conditions, prior lease, withdrawal, or other changes without notice and same should not