The boom in new office space in Toronto has been growing steadily for years. It is actually quite surprising, however, since corporations are leasing less space than ever before. Supply is rapidly outgrowing demand, with 5.4 million sq. ft. of office space already under construction. This is happening despite the fact that tenants are leasing less space, and are finding ways to make what they have work to their benefits. However, with a total of seven Class-A buildings already under construction, the pace at which office space is growing is the fastest it has been in 20 years.
While experts say that this does not necessary indicate a struggling economy, it can be a cause for concern for office owners and developers. Masha Dudelzak, a senior analyst at CBRE, stated that this downsizing is a sign that employers have been able to be more efficient with new technology. This efficiency is what has led to the usage of less space as opposed to poor business performance. Even so, this boom in growth is part of a recent trend: from 2009-2011, 4.4 million sq. ft. of office space was added in Toronto and only 46% of that space was leased before construction began.
Ms. Dudelzak further stated that this is the first time that advancements in technology have resulted in shrinkage in the usage of office space. Furthermore, this is part of a trend, and usage will continue to reduce over the years. This comes with its own set of pros and cons: on the one hand, it is a boon for tenants because they have more available space to choose from; on the other hand, this also means that the newly built office towers will be harder to lease.
Time will tell how this difference between supply and demand will affect the commercial property market in Toronto.
Source: The Globe and Mail
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