Tuesday, April 12, 2011

Vacancy rate down as office real estate recovers from recession

Toronto’s office space market is brushing off the remaining signs of recession as vacancy rates start to lower in the downtown core, a new report says.

According to Colliers International’s semi-annual report released Tuesday, the GTA’s average vacancy rate inched down over the past six months to 6.4 percent. Meanwhile, the availability rate in the downtown core also decreased from 10.3 percent at its peak in 2009 to a pre-recession level of 9.1 percent.

“These are signs of solid recovery and the resiliency of the Toronto office market,” said John Arnoldi, managing director with Colliers International in Toronto.

He pointed out that three new office buildings – the Telus tower, RBC tower, and the Bay And Adelaide centre – that have cropped up in the city are full.

“The city waited nearly 14 years for a new tower and these came up during the recession and were still occupied,” Mr. Arnoldi said. “Toronto’s skyline has been changing dramatically and there are definitely more on the horizon.”

The downtown and mid-town areas are recording lower vacancy rates at 5.7 per cent and 4.8 per cent respectively.

“There was a concern that with the global meltdown, many downtown financial services would move back their offices into the suburbs,” Mr. Arnoldi said. “But if anything, we’re seeing them re-entrenching in the downtown core.”

The trend of recovery can also been seen in Montreal, according to Colliers International.

“Market fundamentals and industry players all indicate that the Greater Montreal Area office market is on a path to recovery,” said Andrew Maravita, managing director with Colliers International in Montreal notes. “If the macro-economic conditions continue to improve, after a few years of drought in terms of new inventory, the vision of cranes in Montreal’s skyline is a realistic expectation.”

It’s not just a Toronto and Montreal success story, said Cushman & Wakefield, another real estate broker consultancy group.

“What’s really neat is this is Canada-wide story,” said Stuart Barron, national director of research at Cushman & Wakefield. “There are rumours on the streets of the new developments in at least four major cities – and in Toronto, you could expect to hear announcements of at least three more developments.”

Colliers also reported the GTA industrial real estate market also experienced a rebound, with more than 16 million square feet of industrial space sold over the past six months and nearly matching the total transaction volume of 2009.

However, while Mr. Barron agreed that downtown Toronto is showing a strong recovery, it’s not a trend that is necessarily reflecting in the GTA suburbs.

“The GTA is really a tale of two cities,” he said. “Suburban markets continue to feel the brunt of the recession. Downtown, on the other hand, has seen unprecedented demand.”

He attributes the suburban market’s slower recovery to a greater connection to U.S. businesses.

“Suburban markets saw shockingly weak demands over the last two years,” Mr. Barron said. “The GTA west [area] had average demand strength of zero and that in the history of the GTA west, they’ve never seen.”


Source: TAMARA BALUJA Globe and Mail Update