Toronto Office Space Vacancy Hits A New Record High—So Did Prices

Looking for office space in Toronto? You’re in luck, because there’s a whole lot of it waiting for new tenants, according to commercial real estate giant Avison-Young. Toronto office space available for lease surged into Q2 2024, as vacancies pile up and more companies offload surplus space. A fifth of the market is now available for lease, though there’s just one odd hurdle—prices are at a new record high.  

A Fifth of Toronto Office Space Is Available To Lease 

Greater Toronto office space continues to suffer from a rut. Office space available for lease climbed 0.7 points to 20.2% in Q2 2024. That’s 1 in 5 sqft of office space currently up for lease-a big shift from pre-2020, when office space was rapidly becoming scarce. 

Breaking it down, total availability is split into two segments, vacancy and sublet. Vacant space climbed at nearly double the average rate, rising 1.3 points to represent 14% of office space across the GTA. The remaining 4.2% of availability is sublet space, where a tenant is looking to lease part or all of their current lease. 

Toronto Office Space Sitting Vacant Hits A New Record

Total availability, vacancy, and absorption trends for Greater Toronto office space. 

Source: Avison Young. 

Both downtown and the ‘burbs have similar availability, but very different compositions. A fifth (20%) of downtown office space is available for lease, with 15 points vacant. In contrast, a similar 19.8% of suburban office space is available for lease, but only 12.7 points were vacant. The remainder of both are sublease availability, with the suburbs beating the city by 2.1 points. 

Toronto Office Demand Is Stronger In North & West of The City

The share of Greater Toronto office space available to rent by region across Greater Toronto. 

Source: Avison Young. 

Toronto Office Space Prices Continue To Rise Despite Vacancy

Greater Toronto office space may have a demand problem, but that has little impact on price. The average net asking price per sqft hit records for virtually all classes—Trophy ($52.60), Class A ($27.30), and Class B ($24.20). That’s not the way supply and demand traditionally works, but slanted incentives might be playing a role. 

Greater Toronto Office Rents Are Hitting New Highs 

The net asking rent per square foot for office space across Greater Toronto. 

Source: Avison Young. 

There’s quite a few reasons to hold higher vacancy rates, including just waiting out a “temporary” downturn. Some landlords prefer not to lower the cost per sqft, instead offering incentives like a month or more free. Others simply just don’t want to provide fuel for existing tenants to negotiate lower rates. 

At the same time, there’s incentives to keep the units vacant. The City of Toronto is currently studying whether or not to allow the conversion of vacant and underused office space into housing. It would be a permanent loss for the economy, but with incentives such as property tax relief and subsidized capital, it’s a gamble that can yield a signficant payoff.  

The reason for higher vacancies and prices are ultimately individual to each building. One thing is for sure though—Toronto’s office market is undergoing a big transformation, and it’s unclear if this will be permanent. Workers are getting used to not commuting, and companies are getting used to the savings of not having to maintain such large office spaces. 

A question worth considering—if a company can maintain remote workers, what stops them from seeking labor in more cost effective markets? The trend of sizing down office space may be temporary, or the potential amplification of the shift to remote and artificial intelligence outsourcing.

9 Comments

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  • Timmy 3 months ago

    Bay St is a total ghost town. Apparently Chow met with our building manager to beg them to give more concessions to prospective tenants because the traffic is so low it’s going to wipe out billions in tax revenue from falling values.

    • Trader Jim 3 months ago

      Can confirm. Have an office I use maybe once every few weeks, and it’s strictly just to be social with subordinates that hate working from home. My guess is they hate it because their places aren’t big enough, because earning 3x what I did after inflation still isn’t enough to buy the same things I got as a Gen Xer.

  • Trader Jim 3 months ago

    Build roads, you get cars. Build bike lanes, you get no cars and only occasional commuter traffic on the weekend.

    Love my bike but I’d never bike to the office in my suit in the summer, so I’m not sure who needs a bike going into Bay St.

    • RW 3 months ago

      There’s a bike lane by the TRREB office, on an industrial backroad that maybe gets 1 or two bikes during rush hour. Hundreds of hours of gasoline burned and time wasted so 4 princesses can have their special lane.

      • Terrance 3 months ago

        Cyclists should be licensed and insured, then operate on the same roads as the rest of us.

        Bay St. is a good example of how the protection of a few idiots that can’t help but run into bikes because they don’t understand road signals, can cost the economy literally billions.

    • Rat 3 months ago

      Toronto maybe the only big city that don’t build road bridges; The only city that deliberately shut down left turn traffic green arrow, because it trust more on mass free traffic than ordered organized traffic; The only city keep put up more condo and refuse update water supply and sewage facilities. Political postures over run business and lives.

  • Jamie Price 3 months ago

    Data makes two important points:

    – it’s a bubble. Prices are rising even as demand falls to record low, indicating there’s no fundamental driver

    – the price is too high for office space, because in Ottawa and Calgary they’re seeing a lack of office space. Aside from the ones the government is helping to convert to housing (bad idea), they need to build more to accommodate workplaces.

    Part of the reason NYC and SF killed its local economy—first went the offices, then the jobs, then the people. Now they’re spending trillions to try and get people back but once people move on—they move on. Ask Montreal, which used to be the Toronto of Canada before the language & financial crisis gave it a double whammy and pushed all HQs to Toronto in the 90s.

    • JayJay 3 months ago

      Sounds just like RRE, fantasy pricing vs reality. Which goes first? Commercial or Residential? Or will it be linked deathspiral as debts finally get written down and jobs are loss to pay the creditors?

  • Pat 3 months ago

    Bros wouldn’t know a bubble if it bit them on the assets

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