TORONTO – The downtown Toronto market saw the first dip of the year in the office vacancy rate in Q4 while Greater Toronto’s industrial market finished the year with unprecedented demand, according to a new report from real estate firm JLL.
Toronto’s industrial market finished the year with an extreme lack of available product, stated a Jan. 24 release. Under those conditions upward pressure on occupancy costs has accelerated notably in Q4.
Average asking rates reached $11.66 in the quarter, a substantial increase of 7.8 per cent since last quarter and 13.8 per cent since Q4 2020.
Meanwhile industrial building purchase prices are rising at an even faster pace. Average per-square-foot sales prices reached $299 on the quarter. This represents a 7.9-per-cent increase since Q3 and a 32.3-per-cent increase from one year ago as demand from both users and investors remains at unprecedented levels.
Notable completions on the quarter include Canada Post’s 600,000-square-foot built-to-suit
facility in north Scarborough and HOOPP’s 773,000-square-foot iPort Caledon Building D that has been 73-per-cent pre-leased to Worldpac.
Looking into 2022, about 13 million square feet of space is projected to be complete on the year
signalling continued elevated construction said JLL.
While available space continues to be scarce, notable large new leases were still signed in the quarter. This includes a 750,000-square-foot deal for Lowes at 11319 and 11233 Derry Rd. in Milton. Rockwool also signed a deal for 445,000 square feet at Orlando’s 1655 Reading Ct., which is currently under construction.
On the office side, the Toronto vacancy rate dropped to 9.6 per cent in Q4, a reduction of 20 basis points from 9.8 per cent in Q3. Although this is not the lowest rate recorded this year, stated JLL, it is the first reduction in quarter-over-quarter vacancy.
Class A buildings continue to outperform B and C assets. The sublease market also showed some signs of recovery in the quarter with sublease vacancy down to 2.7 per cent from 2.9 per cent.
Over 1.2 million square feet of new inventory was added to the market in Q4. Menkes Developments completed 125 Queens Quay East and 100 Queens Quay East which were close to 80-per-cent pre-leased. The 100-per-cent pre-leased Liberty Market Tower also finished construction this quarter, with WeWork taking 60,000 square feet in the building.