Toronto Office Market Report
As Downtown Toronto office vacancy hit 14.9% at year-end 2024 - the second highest vacancy recorded since 2000 - it also marked the first quarter-over-quarter decline in vacancy since 2019. Annual absorption swung positive in 2024 as overall vacancy and availability declined at year鈥檚 end, a sign that Downtown Toronto鈥檚 office market may be stabilizing heading into 2025. While leasing activity in the Financial Core has returned to pre-COVID peaks, vacancy remained elevated. While leasing activity in the Financial Core has returned to pre-COVID peaks, vacancy remained elevated. This suggests that stabilization occurred as tenant right-sizing completed in 2024. Slower job growth is limiting improvements in office utilization by downtown tenants, which is translating into weaker organic leasing growth even in popular downtown submarkets. Tenants are still seeking out model suites of all sizes, particularly in well-located and recently constructed class A premises in Downtown South and the Financial Core with landlords increasingly accepting the fit-out costs to lease the space. Elevated vacancy that remained downtown in 2024 despite the return of leasing velocity was increasingly the result of rising amounts of backfill space that is not being occupied due to much of it being in obsolete office space in unpopular areas. Renewals and deals in new or near-new space remain key leasing drivers in Downtown Toronto, particularly in the Financial District and Downtown South submarkets, as tenants flock to recently constructed, highly amenitized buildings. While the vacant delivery of Portland Commons in late 2024 pushed up vacancy in Downtown West, the amount of new space under construction downtown has dwindled to ~2.2 msf, leading to at least one new large project being considered. With class A rents diverging more from class B/C rents downtown, more tenant inducements tend to be needed, particularly outside the Financial Core and Downtown South. Rents for class B/C space are flat but showing signs of softening.
Toronto Industrial Market Report
GTA industrial vacancy rose to 3.1% at the end of 2024, the most vacancy recorded in the GTA since early 2015. Regional vacancy was less than 2% from mid-2017 through 2023. GTA industrial leasing in 2024 was muted with little speculative leasing, but the activity that occurred has been very balanced among consumer goods and third-party logistics tenants. Sublease space availability spiked to its highest level since 2016 at the end of 2024 as tenants right-size and limit costs with U.S. tariff threats looming on the horizon threatening growth in 2025. Rental rate differentiation among submarkets increasingly impacting tenant decisions as occupiers in softer submarkets such as Durham and Halton renew at favourable rates. Halton had the highest industrial vacancy rate in the GTA at 6.4%, followed by Durham (4.9%) and Peel (3.1%). Toronto was the tightest submarket (2.1%) followed by York at 2.2%. Almost 10.1 msf was under construction in the GTA at the end of 2024, a drop from the 11.6 msf under construction at the end of 2023 and a massive decline from 18.5 msf at the end of 2022. Estimated asking rates peaked at mid-2023 and have been declining since with rents in Peel and Durham down the most in the past 12 months. Rents only rose in York Region in 2024. Heightened uncertainty generated by threats of U.S. tariffs and their subsequent economic impact has also generated a more favourable environment for those tenants willing to transact. Sale proceeds of $5.6B for GTA industrial assets in 2024 were the fourth highest in history following the extraordinary dollar volumes of 2021 ($7.8B), 2022 ($7.6B) and 2023 ($10.5B).
