Greater Toronto Area Office Market Report Q4 2020
Net Absorption This Quarter
-1.4M SF
MARKET OUTLOOK 12-Month Absorption
-3.7M SF
5-Year Quarterly Average
40k SF Vacancy This Quarter
6.2%
Year-over-Year
220 bps
Asking Net Rent This Quarter*
$21.95 PSF
Year-over-Year
10%
*weighted average
Development/Sales Under Construction
9.0M SF
Negative absorption in Q4 2020 lowered to -1.4M SF, bringing the 12-month absorption for the GTA to a total of -3.7M SF. The GTA vacancy rate increased to 6.2%, a total of 220 bps higher since the beginning of the year. In the downtown market, vacancy reached 4.3%, an increase of 320 bps since Q1 2020. There was a total of 177K SF of new supply introduced this quarter, including 99 Atlantic Avenue and 1908 Ironoak Way.
Sale Price (avg.)
$533 PSF
New Supply
177k SF Accelerating success.
Downward pressure on rental rates continued in Q4 with lower averages recorded across the GTA’s major submarkets. Since Q3, the average Downtown rental rate decreased 4% to $36.44 PSF while the average Midtown rate decreased 3% to $27.08 PSF. Across the Suburban market, rental rates remained relatively stable, decreasing by only 1% to $16.80 PSF. Despite this decline in rents on a submarket level, the continued large influx this quarter of Downtown Class AAA, A and B available space is skewing the proportional weighting of higher quality space with higher rents in the make up of overall GTA average rent. Therefore, despite the respective submarkets seeing falling rents, there was
an increase to the average GTA asking rental rate of 2% to $21.95 PSF since Q3. The proportion of sublease availability compared to total availability across the GTA continued to climb this quarter, resting at 22.7% as of Q4 2020. This was an increase of 18 bps from the previous quarter and nearly 100 bps since Q4 2019. Noticeably across the major submarkets, the proportion of sublease availability skyrocketed to 38.1% in the Downtown market– nearly doubling the amount of sublease space available the same period last year. Looking back on 2020, landlords were intent on preserving face rates and preferred to offer incentives and flexible terms to tenants. Moving forward in 2021, an adjustment in price expectations between landlords and tenants will be imperative in order to increase transaction activity. Until middle ground is reached between the two parties and more certainty returns to the market, more instances of short-term deals are likely expected as companies continue to hold off making major business decisions.
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