2010 could be a leaser’s market in Toronto. 2009 results show that the market for office space in Toronto has declined. Further, these declines are expected to continue throughout 2010.
The anticipated asking rent for Toronto office space is expected to continue to fall until the end of 2010. The cause for this decline has been a combination of events. Firstly, the economic recession has squeezed many organizations and restricted credit. Without available credit fewer companies are able to afford to pay high rent; and in many instances, even to exist. The second reason for the decline was an increase in new office buildings, as was highlighted by Colliers International. Much of the new office space was B and C grade space, constructed primarily in Toronto’s downtown core. 16 new buildings were constructed in 2009 contributing nearly 4.7million new square footage of office space. Declining demand and increasing supply are putting downward pressure on asking rents. It is forecasted that average office rent could fall to $16.00/SF by year’s end; from $16.20/SF ending 2009 and $17.83/SF ending 2008.
Increased supply and decreased demand have also affected Toronto’s sublease market for office space. According to Colliers International, since Q4/2008, sublease vacancy has increased by 48%. This should not come as much of a surprise. The increase in office space for lease increases the total quantity of space available; contributing to downward pressure on prices. Businesses looking to spread their costs and make use of unused space are expected to continue feeling the pinch. It is anticipated that vacancy rates in Toronto’s office sublease market could continue to rise to 6.9% by the end of 2010; it is currently 6.1%. All of this bodes well for those looking to acquire space.
Falling office prices in both the sublease and lease markets of Toronto could bring much needed comfort to those looking to expand. Better prices and wider selection is all consumers ever ask for.