Spurred by heightened demand, the Greater Toronto Area’s commercial sector is seeing some of the lowest vacancy rates in North America, according to a new market analysis by Marcus & Millichap.
Net absorption is expected to approach 5 million square feet this year, pulling down the vacancy rate to 4.4%.
“This has contributed to rent growth that has outperformed the national rate, rising almost 26% over the past five years. Another year of exceptional space demand will compress the market vacancy rate to its lowest point of the cycle, supporting healthy rent gains.”
This is despite an intense pace of construction that will see approximately 2.2 million sq. ft. of office space completed in the GTA by the end of 2019.
Much of this hunger for offices is attributable to the rapid growth of the region’s tech sector. Toronto’s undisputed status as a global tech destination has proven especially attractive to revenue-rich tenants.
“An open immigration policy and mature tech ecosystem have national and international firms adding to their workforce in Toronto,” Marcus & Millichap noted in its study.
“The metro has become increasingly popular as a major hub for tech and artificial intelligence, leading companies such as Shopify, Amazon, Microsoft and many others to announce plans to bring on more workers and take up additional office space.”
The first quarter of the year, in particular, saw more than 50,000 new jobs added to GTA’s workforce, “many at the high-tech companies that have been driving office absorption.”
“Large supply influx brings more options to Toronto,” the report explained. “The vast majority of construction is occurring downtown, where roughly 8.6 million square feet is scheduled for delivery by 2022.”