Toronto's office market continues to accelerate

With tech companies playing a major role in market activity, the office segment was the only commercial sub-sector in Toronto to post quarter-over-quarter growth, according to Avison Young’s Commercial Real Estate Investment Review: Greater Toronto Area study.

Transactions involving office properties added up to $767 million during Q1 2019, approximately 8% more than the level seen during the quarter prior. This also represented 28% of the regional commercial market’s total for the first quarter.

GTA’s overall commercial sales – covering industrial, retail, office, multi-residential, and ICI properties – fell by 18% quarter-over-quarter to end up at $2.7 billion. Q1 2019 was the second consecutive quarter that saw no commercial asset class getting more than $1 billion in transactions.

The figures came hot on the heels of 2018, which saw the office sub-sector magnetizing the largest capital of any GTA commercial property type for the fifth straight year. Overall commercial investment for that year was a record-high $15.6 billion.

“Sellers are taking advantage of the extremely tight market and fierce competition among buyers,” Avison Young noted, but quickly added that “despite buyers’ enthusiasm, a bid-ask gap is impacting deal velocity and some anticipated sales (such as those of Bloor Islington Place and AeroCentre) have yet to materialize.”

CBRE’s Paul Morassutti argued earlier this year that the tech industry will most likely be Canadian commercial real estate’s strongest pillar in the event of a recession.

“Over the past 10 years, tech has grown at more than 2.5 times the pace of the energy sector and three times the overall economy,” Morassutti said in late February.

“Tech companies anchoring new buildings is something we have virtually never seen before.”