The flight from Toronto office space was supposed to be temporary, but it doesn’t look that way. Global commercial real estate giant Avison Young data shows Greater Toronto offices hit a new record vacancy rate in Q1 2024. Even more space is available to rent, as more tenants look to shed the pricey rentals through subleases.
Nearly 1 in 7 SQFT of Office Space In Greater Toronto Is Vacant
Greater Toronto is seeing vacant office space surge. The vacancy rate for the region climbed 40 basis points (bps) to 13.7% in Q1 2024, and 150 bps higher than last year. Roughly 1 in 7 sqft of office space is vacant, the highest rate going back to at least 2000.
It’s not just a suburban issue either, with Downtown Toronto seeing the issue intensify even faster. Downtown saw the vacancy rate climb 90 bps to 14.3% in Q1 2024, overrepresented compared to the region. The vacancy rate surged a whopping 170 bps since last year, as the city’s downtown hollows out. But wait, there’s more!
Toronto Office Space Availability & Vacancy Continues To Climb
Source: Avison Young.
Greater Toronto Has Even More Office Space Available For Rent
The availability rate represents the share of total office space available to rent. It combines the vacancy as well as leases looking to end or sublease, meaning even more space is available.
Greater Toronto’s office vacancy rate climbed 20 bps to 19.5% in Q1 2024. This represents a 100 bps increase from last year, and nearly 1 in 5 sqft of office space is on the market.
Once again, not just a suburban issue as many might assume. The availability rate in Downtown Toronto rose 90 bps to 19.1% in Q1 2024, up 170 bps from last year. Despite this, prices haven’t made much of a move over the period.
The agency attributes the shift in space to a combination of factors. Most notable, workplaces shifting preferences as well the construction of new office space contributing to the total availability.
There are some signs of firming, with average rents still showing some stable growth for Class A and Class B office space. Trophy office space hasn’t been so lucky, at roughly the same cost it started 2020 with, despite increased operating expenses.
However, the path forward isn’t crystal clear. The agency warns the next few quarters will see some large tenants take possession of newly completed spaces. The former premises vacated may contribute to further woes if new tenants don’t materialize fast.
