MARKET REPORT

TENANT’S

GUIDE

TORONTO

Experience
Integrated Services

FOURTH

QUARTER

2013

Sector Insight
Michael Lom...
MARKET REPORT

TORONTONMARKET G U I D E
I FIRST QUARTER 2012T O
TENA T’S
TORON

FOURTH

QUARTER

2013

Overview

Major Tra...
Toronto, Ontario
Te n a n t ’s G u i d e

North American Markets

Fourth Quarter 2013

Overview

Major Transactions

Over ...
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Cresa office leasing market report toronto 2014

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Cresa office leasing market report toronto 2014

  1. 1. MARKET REPORT TENANT’S GUIDE TORONTO Experience Integrated Services FOURTH QUARTER 2013 Sector Insight Michael Lomax Tenants are increasingly recognizing that their corporate premises relocation or renovation. Accurate industry knowledge, design and may not be designed to support their changing needs. Once this engineering solutions, budgeting and scheduling and overall becomes apparent, decision makers naturally want to correct the corporate impact must be delineated with recommended situation as soon as possible in order to increase efficiency and approaches to accomplish a successful transition. Cresa’s effectiveness. Real estate decisions are based on numerous experienced Integrated Service providers sit on the tenant’s side as financial and strategic concerns that often require considerable advisors and provide the necessary guidance. evaluation and a thorough and detailed process for implementation. As such, the path to any successful solution includes a professional Advice approach with experienced real estate consultants. Individual stakeholders can be self-serving; this is problematic, as The overall critical path to completion of leaseholds is best serviced the overall corporate expectation must encompass everyone’s by those who execute these practices every day. Our Project needs (while still supporting the overall mission). Cresa’s Integrated Management team often hears of tenants being advised that the Service platform establishes stakeholder requirements, develops a traditional design-bid-build process is the least complicated and sound strategy, sets milestones and defines fiscal restraints right most effective; this may in fact be the case, if the client’s core from project kick-off, regardless of a decision to move, stay or alter business is project management. However, if the core business is the premises. Strong leadership and a single point of contact unrelated, nothing could be further from the truth. Clients need to throughout the process allows for client confidence and trust, be empowered with knowledge and expertise in order to make the establishing a relationship that ensures that Cresa will deliver on its best possible business decisions for each issue along the path to On September 24th, 10 members of the Cresa Toronto team rode stationary bikes and raised funds for the Juvenile Diabetes Research Foundation. The event was a great success, and our team raised $2,756, contributing to the almost $200,000 raised overall. Many thanks to our donors who helped us achieve or fundraising goals, and who make research and advocacy for Juvenile Diabetes possible. mandate and achieve the client’s goals. Discipline LOCATION Pallett Valo LLP 77 City Centre Drive Mississauga, Ontario 23,597 SF Overview Pallett Valo LLP (“PV”) is the largest and one of the most respected law firms in Peel Region. The firm had been operating racking. Low odour and low VOC adhesives and paint products out of 90 Burnhamthorpe Road West for 22 years, but needed to were specified to maintain a healthy office and construction reconsider its space as an expansion had become necessary and environment. Electrical design mandated zone sensors for could not be supported. Cresa Toronto commenced its consumption during occupancy only, and auto off when not engagement with PV proactively in order to assist with its real occupied. The design maximized natural light penetration into the Tenant estate strategy moving forward. office, which traditionally had not been considered in Legal office Transaction Management design. In partnership with the landlord, the environmental The Arthritis Society 393 University Avenue PV was very clear in its desired image and end result: a space systems set back during the evening and weekend hours for that would display the professionalism a law firm requires, a reduced utility consumption. Canadian Investor Protection Fund 100 King Street West layout and design that would carry it through a long term lease PV officially moved into its new premises earlier this year, and is and respect for the environment through the use of responsible Aura Minerals Inc. 155 University Avenue now operating out of a state of the art office facility. The private material selections. PV’s partners decided that remaining in meeting areas and spacious boardrooms offer cutting edge audio Mississauga City Centre in relative proximity to its original visual capabilities, high performance acoustics and exceptional premises was the best solution, as it would continue to provide design, providing optimal use of space. Information Technology community awareness, accessibility for clients and uncompromised was modernized, and future possibilities are user ready and amenities for staff. 77 City Centre Drive is an A class building with provide flexible options. In order to accommodate this impressive 151 Front Street West much potential for a professional and environmentally conscious new layout while maintaining budget expectations, Cresa re- image to be portrayed, and as such PV completed a transaction purposed and restructured existing improvements. By utilizing for space on the third floor. said improvements, PV could afford to purchase ‘green’ materials Design and Project Management where necessary, enhancing the firm’s environmentally The design exercise respected 'sustainability' throughout the responsible culture. Cresa enabled the process seamlessly, and process. Although not LEED certified, the product selections for all consistently empowered PV to make the best possible business finishes represent environmentally respected materials, sources of decisions throughout. The project was completed with a origin and installation methods. Attention was paid to the reuse of commitment to cost control, on schedule and with the highest existing wood doors, metal frames and existing metal computer quality of attention and service. Cresa Transactions Size 19,551 Type Expansion/ Renewal 6,400 Relocation 4,284 Relocation 20,696 Renewal iGate Technologies Canada Inc. 8,008 2425 Matheson Boulvard East Relocation 11,344 Renewal Constellation Homebuilder Systems 9,000 1840 York Road, Baltimore Relocation Brenntag Canada Inc. 43 Jutland Road Peer 1 Network Wood Bull LLP 65 Queen Street West Tetra Tech WEI Inc. 350 Bay Street Voltari Canada Inc. 130 Spadina Avenue 4,297 4,342 3,458 Renewal Relocation Renewal Prepared by Cresa Toronto Cresa Toronto Inc., Brokerage 170 University Avenue, Suite 1100 Toronto, Ontario M5H 3B3 416.862.2666 www.cresa.com contact: bvandermark@cresa.com
  2. 2. MARKET REPORT TORONTONMARKET G U I D E I FIRST QUARTER 2012T O TENA T’S TORON FOURTH QUARTER 2013 Overview Major Transactions Over the past quarter, the overall GTA availability rate increased to 11.4%, up from 10.5% recorded at the end of Q2 2013. Both the Downtown and Suburban markets contributed to this trend, with increases of 7.6% to 8.9% and 13.7% to 14.1%, respectively. During the same period, the availability in the Financial Core increased from 8.7% to the current 10.4%. Availability in A Class buildings in the Financial Core increased from 8.8% at the end of Q2 2013 to the current 10.9%, while the availability in B Class buildings increased from 7.7% to 8.1%. Tenant/Buyer Size(SF) Type Samsung 125,000 Office Lease The Globe and Mail 125,000 Office Lease Instaclick 24,000 Office Lease Brenntag Canada Inc. 21,000 Office Lease The Arthritis Society 19,500 Office Lease Peer 1 Network 11,000 Office Lease 8,000 Office Lease Despite the increases in availability, gross rents are still increasing in the majority of nodes. The average gross rent in the GTA office market recorded at the end of Q3 2013 equals $29.95 PSF, an increase from $29.86 PSF recorded at the end of Q2 2013. The average gross rent in the Financial Core also increased slightly to $44.26 PSF from $44.21 PSF, with average gross rent among A Class spaces in the Financial Core increasing to $51.74 PSF from $50.21 PSF. The average gross rent in the Suburban market has increased slightly over the past quarter to $27.55 PSF from $27.36 PSF, as recorded at the end of Q2 2013. iGate Technologies Lease/Sale Availability Rate Market Trends • The availability in the Suburban market increased for the fifth consecutive quarter • The Financial Core has experienced increased quantity of direct and sublet availability Tenant’s Perspective Average Rental Rates Although gross rents have remained relatively steady since the beginning of 2010, we have witnessed significant increases in availability rates since Q3 2012 from 9.1% to 11.4%; these rates surpass the levels we saw in Q1 2010. While supply has been increasing over this period, a smaller percentage of total inventory is being occupied by tenants. CBD Class A Office Class B Office Q1 2013 $50.15 $41.39 Q2 2013 $50.21 $41.87 Q3 2013 $51.74 $42.12 Suburban Class A Office Class B Office Q1 2013 $30.11 $25.06 Q2 2013 $30.24 $25.22 Q3 2013 $30.38 $25.61 This large increase in availability will serve as a resistance point for further gross rent increases in the short term. Despite lofty landlord expectations, the market conditions will continue to improve for tenants over the next 1224 months as new buildings come on stream and economic growth remains tepid. Prepared by Cresa Toronto Cresa Toronto Inc., Brokerage 170 University Avenue, Suite 1100 Toronto, Ontario M5H 3B3 416.862.2666 www.cresa.com contact: bvandermark@cresa.com
  3. 3. Toronto, Ontario Te n a n t ’s G u i d e North American Markets Fourth Quarter 2013 Overview Major Transactions Over the past quarter, the overall GTA availability rate increased to 11.7%, up from 11.3% recorded at the end of Q3 2013. The Downtown market was the main contributor to this trend, with increases from 9.0% to 10.1% while the Suburban market remained relatively flat decreasing from 14.0% to 13.9%. During the same period, the availability in the Financial Core increased from 10.5% to the current 11.0%. Availability in A Class buildings in the Financial Core increased from 10.9% at the end of Q3 2013 to the current 11.6%, while the availability in B Class buildings decreased slightly from 8.1% to 7.9%. Tenant/Buyer Size Bayer 134,558 Office WorleyParsons 95,868 Office Lease Morguard Corp. Type Lease/Sale Lease 72,887 Office Lease Innomar Strategies Inc. 60,073 Office Lease Sentry Select Office Lease 46,615 United Church of Canada 44,500 Office Lease 25,717 Office Lease PLASP Child Care 24,771 Office Lease Maple Financial The increase in availability has been met with a slight decrease in gross rents for the GTA. The average gross rent in the GTA office market recorded at the end of Q4 2013 equaled $29.68 PSF, a decrease from $29.89 PSF recorded at the end of Q3 2013. The average gross rent in the Financial Core increased slightly to $44.73 PSF from $44.26 PSF, with average gross rent among A Class spaces in the Financial Core increasing to $53.35 PSF from $51.74 PSF. The average gross rent in the Suburban market has remained relatively flat over the past quarter at $27.52 PSF from $27.54 PSF, as recorded at the end of Q3 2013. Ontario Motor Vehicle 11,989 Office Lease Par Canada ULC 11,115 Office Lease Vacancy Rate Market Trends • GTA experienced four quarters of negative absorption • Plentiful options emerging for tenant selection Tenant’s Perspective Overall the GTA office market has hovered from the mid to high $29.00 range over the past six quarters, bounded between $29.44 and $29.89. Although gross rental rates have been steady, Q4 2013 experienced the highest recorded year over year negative absorption in 10 years at 1,002,574 SF, representing 0.6% of supply, which has in turn led to the highest availability rate in 10 years. The overall negative absorption was echoed in the Financial Core, which experienced a negative year over year absorption of 253,408 SF. Supply continues to grow as 28 buildings with 7,084,489 SF are expected to hit the GTA office market by Q2 2017. Of the 28 buildings, two are to be built in the Financial Core adding an additional 1,911,452 SF, which should increase the downward pressure on gross rents if current absorption trends continue. Average Rental Rates CBD Q2 2013 Q3 2013 Q4 2013 Class A Office Class B Office $50.21 $41.87 $51.74 $42.12 $53.35 $42.57 Suburban Q2 2013 Q3 2013 Q4 2013 Class A Office Class B Office $30.24 $25.22 $30.38 $25.61 $30.54 $25.25 Prepared By Cresa Toronto 170 University Avenue, Suite 1100 Toronto, ON M5H 3B3, Canada 416.862.2666 | www.cresa.com

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