If you thought the Toronto commercial property market peaked in 2012, we’ve got news for you. The commercial property boom is far from over.
Toronto is set to add more prime office space in 2014 than nearly any other city on the continent. Developers are taking advantage of low borrowing costs to meet high demand for commercial property.
More than 1.59 million square feet of “triple-A” space will be added in Toronto in 2014, according to data from Cushman and Wakefield, the commercial real estate brokerage and consultancy. Toronto will best New York City in commercial space added, but will remain second to Mexico City.
Prices have skyrocketed, reflecting the high demand for commercial property in the city. In 2012 a group of pension funds paid an astonishing $749 per square foot for the Brookfield Place-TD Canada Trust Tower in Bay Street in Toronto’s downtown core.
“It’s expensive right now and this kind of office space should command a premium for the next few years until much more supply comes onto the market,” Pierre Bergevin, CEO of Cushman and Wakefield in Canada, said in a phone interview with the Financial Post.
“The Toronto market, let’s face it, is relatively closed.”
As noted in a recent TD Economics report, highly educated and skilled young people are moving downtown, pushing the population growth rate up in Toronto’s core. It’s a reversal of a decades-long trend in which the suburbs consistently boasted a higher population growth rate than the downtown core.
Responding to the new trend, companies are setting up shop downtown, close to transit routes and their employees.
How long will the boom last? It could be awhile! As the Financial Post points out, Toronto is home to Canada’s five biggest lenders and is the second largest North American financial services centre.
Let’s just say it’s an exciting time to be in the commercial property business in Toronto.