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Since the official start of the pandemic in March 2020, Toronto’s downtown has been nothing short of a deserted wasteland.
The retail and office CRE sectors saw little activity during the past year and a half, with the majority of the population keeping their distance, isolating and working remotely.
While historically high vacancy rates left little room for optimism, the tides are quickly turning. The “We’re back, Toronto” campaign is gaining traction, and Toronto’s commercial real estate is coming back to life.
CRE vacancy rates dropping
The measures and restrictions posed to stop the spread of the coronavirus pandemic have left quite an impact on Toronto’s CRE market.
The initial wave of lockdowns pushed the historically low vacancy rates to such heights that they’d surpassed those of the 2009 financial crisis. Even as restrictions eased in the second quarter of 2021, the latest April lockdown kept vacancy at 9.8 per cent.
However, now that over half of the Canadian population has been fully vaccinated, Toronto CRE is in for a revival. Remote employees are becoming eager to go back to offices and the “We’re back, Toronto” campaign is incentivizing some 550,000 daytime workers to re-enter the downtown.
Notable tenants are already paving the way, with brands such as Pinterest, Aurora Cannabis, Ryerson University, and Skip the Dishes signing leases in the city core.
Sublet market tightening
Over the past year and a half, sublets have been very much in demand. However, the market has started to tighten.
Almost one million square feet of office space listed for subleasing in downtown cores has been cancelled or leased out as companies rush to reopen their offices.
According to CBRE Canada vice-chairman Paul Morassutti, that is an excellent sign and “only just the beginning of the trend.”
High-end office buildings in demand
Perhaps the most exciting development with workers returning to offices is the rise in demand for high-end office buildings.
Tenants are starting to put more emphasis on better amenities, considering them as necessities rather than luxuries. Better HVAC systems, more space and touchless technology are just a few of the most sought-after amenities in post-pandemic offices.
Summary
While the Toronto CRE market has certainly struggled during the past year and a half, the tide is turning and downtown areas are set to buzz with activity once again.
With CRE vacancy rates dropping, sublets getting cancelled and high-end offices being more sought-after than ever before, we can expect some healthy development in Toronto.
Canadian CRE markets are reviving across the country, presenting lucrative opportunities for investors interested in diversifying their portfolios.
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