Leased commercial space in Toronto declines compared to 2011

Toronto Real Estate Board (TREB) Commercial Division members reported 246,274 square feet of leased commercial space through the TorontoMLS system in August 2012 (calculated for transactions completed on a per square foot net basis for which pricing was disclosed).  This represented a 54 per cent decline compared to August 2011.

The industrial segment of the market continued to account for the majority of leased space (61 per cent), with deals reported for 151,365 square feet.  The average lease rate was $5.74 per square foot net – up from $4.28 per square foot net reported in August 2011.  The average lease rate for commercial/retail properties was down notably from last year.  This change was due to a large retail lease transaction.  Larger properties often lease for a lesser amount per square foot.

“Recent economic news pointed to pluses and minuses for the commercial real estate market in the Greater Toronto Area.  Business investment was a driver of GDP growth in the second quarter, but at the same time growth in exports reached a four quarter low.  These mixed results point to uncertainty about future economic growth, which helps explain why some industrial firms in the GTA have remained on the sidelines with regard to real estate investment,” said TREB Commercial Division Chair Cynthia Lai.

The number of commercial properties sold in August 2012 was similar to the total for August 2011: 59 transactions this year versus 64 last year.  The annual change in the average selling price per square foot was mixed depending on the property type in question.  The average industrial selling price was up on a year-over-year basis whereas the average price for commercial/retail and office properties was down.

“Given the uncertain economic outlook businesses have faced this year, the fact that the number of transactions in August remained in line with last year’s total is a positive sign,” continued Lai.  “It is also important to note that the types of deals differ from one period to the next, which goes a long way to explaining the average price differences between August 2012 and the same period last year.”

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