While it’s a long way from the boom of the past decade, Colliers' Nicholas Kendrew doesn’t think the Greater Toronto Area (GTA) office market is in the dire situation that some people believe.

Activity for deals below $100 million has maintained a decent pace over the past five years and there’s been a “fairly liquid market,” according to Kendrew, a senior vice-president with the brokerage and real estate services firm.

“I think the challenge right now is the bigger, more scale-driven product that's a little less liquid in today's market,” Kendrew told RENX. “But in terms of some of the more boutique assets we've been selling in the suburban markets, we've been getting similar pricing to before the pandemic.”

An increase in organizations demanding that employees return to the office, improving lease renewal rates, and high build-out and replacement costs are contributing to this.

Yonge Corporate Centre and 3650 Victoria Park

There are two significant GTA office properties being marketed at the moment -- at least via public processes -- as Kendrew said most large owners aren’t in a rush to sell.

“I think a lot of these major investors are a little bit skittish because of the economic situation that Canada is in. Many groups would prefer to wait and see how the next few months play out with tariffs and the economy rather than rush to get something out that might not do well because of those economic uncertainties.”

TD Cornerstone Commercial Realty and CBRE are marketing the Cadillac Fairview-owned Yonge Corporate Centre office campus on a 7.79-acre site at 4100-4150 Yonge St. It’s comprised of three mid-rise office buildings totalling 649,808 square feet and a low-rise 7,992-square-foot heritage building housing the Auberge de Pommier restaurant.

“That will be a good benchmark for the rest of the market,” Kendrew observed. “I’m guessing that because this is the second time Cadillac Fairview has had it out with CB and TD, they’re deeply committed to a sale transaction. 

“It will be an interesting one to watch because, from our general experience, a lot of private investors generally tap out at around $50 million to $75 million. There aren't many private investors that can get to the kind of pricing that would do this deal.”

While Kendrew said Yonge Corporate Centre is a “stellar location,” he believes the likely purchaser will collect a few years of rent and then redevelop the complex.

Colliers is marketing a nine-storey, 154,384-square-foot class-A office building on 4.39 acres of land owned by True North Commercial REIT at 3650 Victoria Park Ave. in North York. Known as The Spark, the LEED Gold and BOMA BEST Gold-certified building is only about one-third occupied and is listed for $32 million.

“It's a dual stream process where a leasing team has the lease listing, and they're trying to find tenants,” Kendrew explained. “However, if a qualified owner-occupier stepped forward and wanted to buy the building, we'd sell on that basis.”

Off-market transactions

There are rumours about potential off-market transactions and Kendrew said if they happen, they’ll likely involve bigger Canadian pension funds selling non-core assets. 

“There are a lot of groups that have said, ‘If you have someone who would be willing to pay us this sort of pricing, we will certainly consider that.’ 

“I think a lot of these bigger groups are concerned about the reputational risk of running a very public process and then not transacting, or (not) getting the price that they would have liked.”

Differences in suburban assets 

Colliers brokered the sale of recently built properties at 1900 and 1908 Ironoak Way in Oakville from Ironoak Way Limited Partnership to Binscarth Holdings for $35.25 million last summer. The twin two-storey office buildings combined for 101,697 square feet and were 97 per cent occupied.

“The interesting thing we're seeing, especially in suburban offices, is that a lot of the well-capitalized privates that would have bought either multifamily or industrial now think the pricing is perhaps a little frothy,” Kendrew said. 

“So when you're buying a brand new suburban office building for that sort of pricing with a seven per cent cap rate, and you've got 10-year lease terms and the rents go up every year, that feels like really good value to a lot of those private investors. It's definitely because the buyer profiles have changed that's helped keep pricing in line with where it was previously.” 

While the Ironoak Way properties sold for about $350 per square foot, Colliers also brokered last year’s receivership sale of an eight-storey, 222,285-square-foot office building with a high vacancy rate at 55 Town Centre Court in Scarborough that sold for less than $78 per square foot. 

It was originally listed for $39.5 million but was purchased by 1606555 Ontario Inc. for $17.25 million. Traditional financing wasn’t available because of the high vacancy rate and the capital needed to improve the building.

“Lenders, if there is high vacancy or the lease terms aren't that long, don't want to go anywhere near it,” Kendrew said. “So you're having to look at alternative forms of financing or even buying with cash.”

5600 Cancross Court

Kendrew said there’s been huge demand for vacant office buildings under 100,000 square feet in both the suburbs and downtown. 

Colliers is involved with the sale of a 37-year-old, two-storey, 99,780-square-foot office building at 5600 Cancross Ct. in Mississauga that’s scheduled to close at the end of the month for approximately $32 million. The property was on the market for about a year.

“In a year that building will be entirely vacant with no cash flow,” Kendrew said. “But the buyer has an operating business and wants to move inside the whole building.”

Owner-occupiers are active

Colliers brokered the sale of a vacant small suburban office building to a dental college for $315 per square foot in December 2023 because it was going to cost it more than $500 per square foot to build out its own space and it wouldn’t own it at the end of the lease.

“Usually these owner-occupiers are private entrepreneurs who’ve made a lot of their own money,” Kendrew said. “They've got great banking relationships and they’ve leased at least 10,000 square feet from a landlord, and they're saying, ‘I should buy my building.’ 

“If you've got the right product that has good curb appeal, that long-term is going to be a going concern, a lot of groups are happy to pay a premium to secure the right space.” 

A similar thought process was likely behind recent downtown Toronto office building deals at 438 University Ave., 522 University Ave., 2 Queen St. E. and 25 Dockside Dr. — which all involved owner-occupier acquisition elements.

Foreign owners are interested

Kendrew said there’s “a good cohort” of American and European investors interested in acquiring downtown Toronto office buildings.

“Whether it's for residential conversion or industrial conversion, a lot of these office assets are going to be taken out of the inventory,” Kendrew said. “So I think a lot of privates and foreign groups are seeing that and they're thinking now could be a really good time to get some of these high-quality assets.” 

The low Canadian dollar is also enticing for foreign buyers, but the types of properties they’re seeking — high-quality with long-term leases, a compelling environmental, social and governance story, and located close to Union Station — haven’t been available.