Average weekly - 64%
Peak Day - Wednesday 74%
Low Day - Friday 39%
The return to the office has not yet plateaued in Toronto. Some downtowns in North America are experiencing a levelling-off of occupancy in office buildings related to remote work but this does not reflect the experience in Toronto’s downtown core.
Some recent alarmist commentary has reflected a limited historical appreciation of the Toronto commercial real estate market. The recent vacancy rates in downtown Toronto have never come close to the vacancy of 24% recorded in 1994. Vacancy then was enhanced by a world-wide trend of relocating back-office space to low-cost markets often off-shore.
That trend had a disruptive impact on the market in Toronto’s Financial District in the late 1980s and early 1990s and ultimately contributed to an explosion of new office space in the 905 (See SRRA’s video: “Region in Transition” at https://srraresearch.org/a-region-in-transition-2014).
Both the recent high vacancy and that in the mid-1990s occurred alongside supply issues, which the industry has always managed as part of doing business. The impact of remote-work to date has not been nearly as significant as the movement of back-office space from downtowns to low cost back-office markets was in the past. Nor, we believe, will it prove to be as structurally enduring.
Vacancy in office space has levelled off and absorption figures are reducing vacancy in prime buildings. Mondays are beginning to show signs of increased activity as CEOs increasingly require employees to make one of their “minimum of three days in the office” a Monday (or a Friday).
Your SRRA team
Links to Articles of Interest
U.S. Firm Identifies Extensive Vacancies as Toronto’s Peak Day Occupancy Stuck at 70%
Globe and Mail controversially hires Washington-based firm to analyze what everyone already knows: tenants have always taken the opportunity to relocate to newer buildings with more amenities if they can afford to do so and have a demonstrated need to upgrade. Although remote work trends continue to challenge landlords, actual vacancy levels today are still less scary than the 1990s when downtown employers fled to the suburbs. The Globe’s graphics are great, though.
Olivia Chow in the ROB – City Designing Waterfront LRT in Expectation of Future Funding
Reflecting SRRA’s position on congestion woes, the ROB reported that the TomTom Traffic Index (ranking more than 350 cities worldwide) puts Toronto as the third worst city for slow traffic. Chow highlighted decision to get a jump on the Waterfront LRT. “We desperately need more, better funded transit,” the ROB concluded.
WeWork Saga Continues as Company Prepares to Emerge from Bankruptcy
A brilliant concept? But poor execution. How will history judge the travails of WeWork?
Lease Renewal Cycles in U.S. Market Will Favour Employers: New Report
With suggestions that aggressive deals done today will impact landlord balance sheets for the foreseeable future, credit companies report that tenants are in the driving seat to “unprecedented” levels.
Doubts Over Potential Opening Date Continue to Cloud Future of Eglinton Crosstown
When concrete information is scarce, rumours move quickly to fill the vacuum.
Slow News Day? Nope, A Serious Answer to Balancing the Office Budget with Pre-Owned Office Furniture
An article about used furniture may not initially grab your attention, but this is worth the effort. Faced with shorter leases and a desire to keep up appearances, landlords and employers are finding ways to keep nearly new furniture out of landfills.
Globe Architecture Critic Tackles Toronto’s Treatment of Transit-Oriented Development
Comparing how development in two neighbourhoods in the vicinity of Ontario Line stations will proceed, Alex Bozikovic points out that Danforth and Pape (where it intersects with Line 2) is primed for considerably less density than an equivalent site in less affluent Thorncliffe Park. SRRA has written about the failure to densify along Line 2 in the past.
Pressure on Rogers To Avoid Leaving Houses Adjacent to Offices Vacant
Toronto Council will consider an unusual proposal from a local historian to expropriate vacant housing owned by “multi-billion dollar corporation” Rogers to build affordable housing. Instead, could this be an opening for the Rogers Foundation as the need for more offices seems unlikely.
Does AI Threaten Future of Older Data Centres?
Tales from troubled sites in the U.S. suggest that institutional owners see dim future for older data centres as impact of AI continues to grow. What does this mean for Canadian sites?
Canada to Dedicate $1B+ to Convert Federal Office Portfolio to Housing?
Although the budget has still be debated in the House, the government is doubling down on its support for remote work for federal employees by signaling its intention to convert Post Office office real estate to housing.
Liberal Government’s Plan to Convert Offices to Housing Not Unique
The same week that the Liberals dropped a government offices to housing bombshell, word that New York is considering a “budget deal” to prompt office to housing conversions led one investor to suggest that up to 40M sq ft of offices could be affected.
Housing to be Demolished to Make Room for 59-storey Tower
Perhaps the appeal of replacing a dozen or so townhouses in Toronto with 700 condo units will see this proposal approved, but is this a good way to play the numbers game? Just two weeks ago another developer announced plans a 45-storey tower with two-bedroom units of 481 sq ft each!
Atlanta Plans to Add Stations to MARTA Line Could Trigger Infill Development
Atlanta set an innovative precedent (for the U.S. at least) two decades ago with TOD partnerships that encouraged suburban employers to relocate on transit. New plans could build on those gains. Read Article Here
Offices Occupied Only Three Days a Week? No Problem Says HubbleHQ
A new start-up is offering landlords and employers a way to offset “cost” of unused office space when employees show up only three days a week with an innovative booking program to allows employers to pay only for space they are using – day by day.
BIZNOW Report Signals Green Loans/Sustainable Buildings Less Attractive to Investors
Although this report is U.S.-focused, the message is not good news for advocates seeking to change the dial on how offices, investment properties are conceived and executed. It was hoped that development plans that prioritize carbon-reducing technologies could be a new trend. Fears of “greenwashing” deter institutional lenders.
But New EU Directives Point in the Opposite Direction…
Tough new provisions in Europe are set to be in place by 2030 in an environment where global strife makes energy efficiency a priority.
“The Occupancy Index is supported by the City of Toronto, Downtown Yonge BIA, and Downtown West BIA. It is a measure of the percentage of office employees returning to the office compared to the number of employees who would normally have come to their offices pre-COVID. For a detailed description of the calculation please contact Iain Dobson at [email protected],”