Why Toronto Office Was The Star Of 2016's First Half

Toronto office bucked national trends in 2016's first half, according to Morguard research director Keith Reading (seen above in Toledo, Spain, with his wife, Renée). Vacancy for downtown Class-A is at 5%, and it’s only slightly higher for Class-B buildings. “Which is really surprising,” Keith tells us. As tenants moved into new towers like One York Street and Bay Adelaide East, market watchers nervously tracked the “overhanging shadow” of backfill space. Keith had been bracing for double-digit vacancy amid a flight to quality. “But the reality is the space has leased up quicker than anyone could have anticipated.”

The first half's biggest lease deal was Infrastructure Ontario's 389k SF at Oxford Properties Group’s 315 Front St W, followed by Bank of Montreal’s 221k SF renewal / expansion at Cadillac Fairview’s 250 Yonge St, and LCBO securing 200k SF to anchor 100 Queens Quay E, Phase 1 of the Menkes-led JV’s LCBO lands redevelopment. Activity is just as robust on the office-investment side, propelled in part by foreign capital, which has been “taking a hard look at Canada” amid a weak loonie, low interest rates and post-Brexit uncertainty, says Keith. “And Toronto is the first place they’re looking."

Dutch investors bought the office tower at 1200 Bay St (above) for $86.75M, and rumour has it a German group has 250 University Ave (the old Bank of Canada building) under contract. Other recent landmark office deals include AIMCo / KingSett Capital purchasing a 50% stake in Scotia Plaza for $655M, and Crown Realty Partners / Crestpoint Real Estate buying Allstate Corporate Centre for $148.6M. Redbourne Group snapped up 625 Cochrane Drive and 60 Columbia Way for $79.7M total, and LaSalle Investment Management got 901 King St W for $61M. Keith's take: “Toronto was a star in the first half.”