Cushman & Wakefield

Cushman & Wakefield

December 18, 2014 11:07 ET

Downtown Toronto Office Market Ends 2014 on a High Note

Cushman & Wakefield's fourth quarter stats underscore the downtown's powerful attraction to business as "urbanization" continues to reshape and redefine our city

TORONTO, ONTARIO--(Marketwired - Dec. 18, 2014) - Downtown Toronto continues to be a poster child for the urbanization trend that is sweeping through many of the world's major cities, marked by intensive new residential and office development in urban centres.

Fourth quarter stats released today by Cushman & Wakefield show that in spite of the addition of more than 1.6 million square feet of office space this quarter, demand growth remained robust, with downtown vacancy rising to only 5.0% from 4.9% last quarter -- the exact same rate it was in Q4 2013.

Leasing velocity hit an astonishing 2.3 million square feet during the quarter, largely due to recognition of the activity in the new towers. Absorption - a measure of expansionary growth in occupied space - reached a high of 683,000 square feet during the quarter, again largely due to the success of the new towers in attracting tenants.

The quarterly average downtown absorption since the start office development boom in Q3 2009 has been a healthy 230,000 square feet. Prior to that, the downtown office market had endured a long slump after the so-called tech bust in 2000, and only started coming back to life in 2004. The explosive demand that followed the financial crisis drove vacancy down and rental rates up, which triggered the current development cycle. However, few industry experts initially anticipated that urbanization would have such a sustained and transformative impact on the downtown market.

"The demand for downtown office space in Toronto in the last five years has been phenomenal," said Michael Caplice, Senior Managing Director, Market Leader, Greater Toronto Area, Cushman & Wakefield. "Year after year, we've seen unprecedented office and condo development, and a steady flow of people and businesses moving into our downtown."

Caplice says technology and changing demographics are powerful forces behind the demand for "collaborative, sustainable and densified" workplace models that speak to new work habits and have also given rise to sectors like ICT (Information, Communications & Technology), which have become major new office occupiers.

"These new sectors being created by Millennials are adding to the job and office foundation provided by our banks and other traditional downtown occupiers," said Caplice.

This is consistent with a recent report by Cushman & Wakefield's Global Consulting group titled Facing the Millennial Wave. It reported that office locations close to amenities, public transit and mixed use neighbourhoods are most attractive to the Millennial workforce.

According to a recent Cushman & Wakefield outlook presented at a November client event, downtown demand growth will remain strong through 2015, with vacancy projected to creep up to 7.3% as a result of space left vacant by tenants relocating primarily to new towers.

"We expect demand especially for the new towers to remain robust for the foreseeable future," said Caplice. "In many ways, the performance of our downtown shows that Toronto has truly become a world-class city with a diversified economy that gives it more resilience and a vibrant life of its own."

To view graphic please click on the following link:

(000's sf) Q4 2013 Q4 2014 TREND Q3 2014 Q4 2014 TREND
Financial Core 34,299 5.1% 5.1% 5.4% 5.1%
Downtown Fringe 37,066 5.0% 4.9% 4.5% 4.9%
DOWNTOWN TOTAL 71,365 5.0% 5.0% 4.9% 5.0%
63.1 MSF 71.4 MSF


Cushman & Wakefield advises and represents clients on all aspects of property occupancy and investment. Founded in 1917, it has 250 offices in 60 countries, employing more than 16,000 professionals. It offers a complete range of services to its occupier and investor clients for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, appraisal, consulting, corporate services, and property, facilities, project and risk management.

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