Steady performance proves resiliency of overall GTA office and industrial real estate markets: Colliers
The office and industrial real estate markets in the GTA continued to show the classic benchmarks of a healthy marketplace with strong and steady growth, lower overall vacancy rates and millions of square feet of new office space under construction, says the Colliers International Q3 2015 GTA Office and Industrial Markets Report.
“The GTA office and industrial markets are enjoying a period of strength, vitality and growth,” says John Arnoldi, Colliers’ executive managing director in Toronto. “This enviable position is a key driver of the market’s continuing strong economic activity and reflective of the overall economic health of the GTA.”
GTA Office Report
The GTA office market remained steady in Q3 2015 as the overall vacancy rate declined slightly to 5.4 per cent, from 5.6 per cent in the previous quarter, with the availability rate decreasing from 10.7 per cent in Q2 to 10.0 per cent in Q3. While no new office space was added in Q3, this is not a signal that office construction in the GTA is slowing down, as almost 5 million square feet of office space is currently under construction.
Most significantly, more than 50 office and mixed-use office buildings are proposed throughout the region, which could lead to an even greater office stock in the market.
“The construction crane has been referred to as Toronto’s official bird, and we are seeing that once again throughout the region,” adds Arnoldi. “It will be interesting to see how the market responds to the new space under construction. With large amounts of pre-leased office stock, once delivered, the leasing velocity as to which the remaining new space is absorbed, should provide a measurement of the demand for the additional new office space in the 50 projects which are currently in the proposal stage.”
The financial services sector is once again leading demand for office space, particularly in the Downtown South, Financial Core, Downtown West and GTA West. The engineering and technology/software industries are also looking for space in the GTA, particularly in the West-end and this trend will likely continue. Demand for all office space in the GTA seems to be geographically focused towards the Downtown, GTA North and GTA West markets.
GTA Industrial Report
The report shows the GTA industrial market continuing to show resiliency to any macro-economic challenges in the global economy as it continues to enjoy modest but steady growth.
Every quarter in 2015 had seen positive and strong absorption and this trend continued in the third quarter. The availability of the GTA industrial market continues to decline and is now at 3.1 per cent, a decrease from 3.3 per cent in Q2 2015.
“The continuing decline in the availability rate in the industrial market suggests a continuous demand by tenants, especially in the logistics, warehousing and e-commerce sectors,” says Peter Garrigan, Colliers’ vice president of business development in Toronto. “Users and tenants in those key industrial markets traditionally tend to seek larger spaces to accommodate their growing businesses. We expect the GTA industrial market to see a large influx of new supply entering the market in the upcoming quarters.”
Of note in the Colliers report is the emergence of the Milton area, with a significant increase in new industrial real estate development. Milton is viewed as an attractive alternative to Mississauga and Brampton, which are now experiencing rising costs due to increasing limitations in land availability.