third quarter 2016 research report - cwmarketing.ca · office q3 2016 marketbeat economic...

Third Quarter 2016 Research ReportGreater Toronto Area

2

Table of Contents

STATISTICAL SUMMARY

AVAILABILITY SNAPSHOT

MARKETBEAT

DEVELOPMENT PIPELINE

CONTIGUOUS SPACE REPORT

GLOSSARY OF REAL ESTATE TERMS

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STATISTICAL SUMMARY


MARKETBEAT




Current Quarter 1 Year Ago Current

Quarter Year to Date Current Quarter Year to Date 1 Year Ago 1 Quarter

AgoCurrent Quarter

TORONTO GTA 1356 175,313,074 161,935,207 13,377,867 1,827,483 14.0% 17.3% 2,345,949 8,472,760 (257,600) 664,616 7.7% 7.6% 7.6% 8.9%

CENTRAL AREA 486 88,743,822 85,087,755 3,656,067 1,020,000 18.5% 21.5% 1,137,941 4,954,898 150,138 996,665 4.8% 4.4% 4.1% 5.8%

Downtown 356 72,257,641 69,320,228 2,937,413 1,020,000 18.4% 19.4% 1,052,726 4,415,484 136,506 836,549 4.6% 4.3% 4.1% 5.8%

Midtown 130 16,486,181 15,767,527 718,654 0 19.3% 28.7% 85,215 539,414 13,632 160,116 5.8% 4.5% 4.4% 6.1%

SUBURBAN AREA 870 86,569,252 76,847,452 9,721,800 807,483 12.3% 15.3% 1,208,008 3,517,862 (407,738) (332,049) 10.6% 10.9% 11.2% 12.0%

GTA East 313 33,059,222 29,759,165 3,300,057 313,476 9.6% 11.2% 620,979 1,441,153 41,157 (169,810) 9.1% 10.1% 10.0% 10.8%

GTA North 132 14,828,233 13,949,347 878,886 0 8.4% 11.3% 93,922 404,031 (182,978) (73,628) 6.0% 4.7% 5.9% 6.8%

GTA West 425 38,681,797 33,138,940 5,542,857 494,007 14.5% 18.3% 493,107 1,672,678 (265,917) (88,611) 13.6% 14.0% 14.3% 15.0%

This report is provided for information purposes only. The information and statistical data contained herein were obtained from sources deemed reliable. We do not however, assume responsibility for inaccuracies.

All opinions expressed and data provided herein are subject to change without notice. This report cannot be reproduced in part or in full in any format including electronic or printed media, without the prior written approval from Cushman & Wakefield Ltd.

2016 LEASING ACTIVITY 2016 ABSORPTION AVAILABILITY RATE FUTURE 6 MONTH

AVAILABILITY RATE

MARKET BLDGS

CURRENT INVENTORY

OCCUPIED SPACE

CURRENT AVAILABILITY

NEW SUPPLY YEAR TO

DATE

% SUBLET

STATISTICAL SUMMARYMarket Overview - Q3 2016

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Current Quarter 1 Year Ago Current

Quarter Year to Date Current Quarter Year to Date 1 Year Ago 1 Quarter

AgoCurrent Quarter

2016 LEASING ACTIVITY 2016 ABSORPTION AVAILABILITY RATE FUTURE 6 MONTH

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STATISTICAL SUMMARYMarket Overview - Q3 2016

TORONTO GTAA 537 109,361,971 100,903,995 8,457,976 1,827,483 16.7% 17.8% 1,652,824 5,956,645 60,678 932,554 7.7% 7.9% 7.7% 9.2%B 586 52,714,368 48,412,150 4,302,218 0 9.7% 14.3% 609,896 2,227,665 (260,579) (209,605) 8.2% 7.7% 8.2% 9.1%C 233 13,236,735 12,619,062 617,673 0 7.2% 28.4% 83,229 288,450 (57,699) (58,333) 5.6% 4.3% 4.7% 5.2%All 1356 175,313,074 161,935,207 13,377,867 1,827,483 14.0% 17.3% 2,345,949 8,472,760 (257,600) 664,616 7.7% 7.6% 7.6% 8.9%CENTRAL AREAA 142 55,165,021 52,720,830 2,444,191 1,020,000 20.3% 22.9% 734,299 3,460,482 152,677 885,699 5.0% 4.8% 4.4% 6.5%B 223 26,141,593 25,138,084 1,003,509 0 14.8% 16.9% 337,735 1,276,442 5,573 126,636 4.7% 3.9% 3.8% 5.0%C 121 7,437,208 7,228,841 208,367 0 15.9% 28.8% 65,907 217,974 (8,112) (15,670) 4.0% 3.0% 2.8% 3.7%All 486 88,743,822 85,087,755 3,656,067 1,020,000 18.5% 21.5% 1,137,941 4,954,898 150,138 996,665 4.8% 4.4% 4.1% 5.8%DowntownA+AAA 109 47,649,678 45,536,736 2,112,942 1,020,000 18.9% 19.4% 699,983 3,245,014 146,176 831,894 4.9% 4.8% 4.4% 6.6%B 157 19,052,791 18,410,842 641,949 0 17.6% 14.4% 294,075 989,126 (467) 20,231 3.7% 3.4% 3.4% 4.4%C 90 5,555,172 5,372,650 182,522 0 14.7% 34.0% 58,668 181,344 (9,203) (15,576) 4.3% 3.3% 3.3% 3.9%All 356 72,257,641 69,320,228 2,937,413 1,020,000 18.4% 19.4% 1,052,726 4,415,484 136,506 836,549 4.6% 4.3% 4.1% 5.8%MidtownA 33 7,515,343 7,184,094 331,249 0 29.3% 44.0% 34,316 215,468 6,501 53,805 5.0% 4.5% 4.4% 6.2%B 66 7,088,802 6,727,242 361,560 0 9.7% 20.2% 43,660 287,316 6,040 106,405 7.4% 5.2% 5.1% 6.7%C 31 1,882,036 1,856,191 25,845 0 24.2% 6.2% 7,239 36,630 1,091 (94) 2.9% 2.2% 1.4% 3.1%All 130 16,486,181 15,767,527 718,654 0 19.3% 28.7% 85,215 539,414 13,632 160,116 5.8% 4.5% 4.4% 6.1%SUBURBAN AREAA 395 54,196,950 48,183,165 6,013,785 807,483 15.2% 15.4% 918,525 2,496,163 (91,999) 46,855 10.5% 11.1% 11.1% 11.9%B 363 26,572,775 23,274,066 3,298,709 0 8.2% 13.2% 272,161 951,223 (266,152) (336,241) 11.6% 11.5% 12.4% 13.2%C 112 5,799,527 5,390,221 409,306 0 2.8% 28.1% 17,322 70,476 (49,587) (42,663) 7.5% 6.0% 7.1% 7.2%All 870 86,569,252 76,847,452 9,721,800 807,483 12.3% 15.3% 1,208,008 3,517,862 (407,738) (332,049) 10.6% 10.9% 11.2% 12.0%GTA EastA 137 19,642,944 17,683,339 1,959,605 313,476 10.8% 12.3% 511,760 1,015,521 79,276 (125,878) 8.7% 10.3% 10.0% 11.1%B 145 11,869,067 10,636,963 1,232,104 0 8.5% 9.5% 105,438 406,399 (44,605) (35,801) 10.4% 10.3% 10.4% 10.9%C 31 1,547,211 1,438,863 108,348 0 0.0% 16.1% 3,781 19,233 6,486 (8,131) 5.5% 6.5% 7.0% 7.0%All 313 33,059,222 29,759,165 3,300,057 313,476 9.6% 11.2% 620,979 1,441,153 41,157 (169,810) 9.1% 10.1% 10.0% 10.8%GTA NorthA 58 9,756,542 9,006,334 750,208 0 8.2% 12.6% 70,882 323,487 (191,692) (94,087) 7.5% 5.7% 7.7% 8.8%B 46 3,548,307 3,455,173 93,134 0 13.7% 7.5% 22,130 76,949 6,569 21,861 3.3% 2.8% 2.6% 3.1%C 28 1,523,384 1,487,840 35,544 0 0.0% 0.0% 910 3,595 2,145 (1,402) 2.6% 2.5% 2.3% 2.4%All 132 14,828,233 13,949,347 878,886 0 8.4% 11.3% 93,922 404,031 (182,978) (73,628) 6.0% 4.7% 5.9% 6.8%GTA WestA 200 24,797,464 21,493,492 3,303,972 494,007 19.4% 17.7% 335,883 1,157,155 20,417 266,820 13.0% 14.0% 13.3% 13.8%B 172 11,155,401 9,181,930 1,973,471 0 7.7% 16.3% 144,593 467,875 (228,116) (322,301) 15.8% 15.6% 17.7% 18.8%C 53 2,728,932 2,463,518 265,414 0 4.3% 34.6% 12,631 47,648 (58,218) (33,130) 11.1% 7.6% 9.7% 10.0%All 425 38,681,797 33,138,940 5,542,857 494,007 14.5% 18.3% 493,107 1,672,678 (265,917) (88,611) 13.6% 14.0% 14.3% 15.0%

This report is provided for information purposes only. The information and statistical data contained herein were obtained from sources deemed reliable. We do not however, assume responsibility for inaccuracies.

All opinions expressed and data provided herein are subject to change without notice. This report cannot be reproduced in part or in full in any format including electronic or printed media, without the prior written approval from Cushman & Wakefield Ltd.

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STATISTICAL SUMMARY


MARKETBEAT




VACANCY SNAPSHOT

INVENTORY % of AVAILABILITY - PAST YEAR AVAILABILITY - PAST QUARTER

(000’s sf) MARKET Q3 2015 Q3 2016 TREND Q2 2016 Q3 2016 TREND

Financial Core 35,319 20.1% 5.8% 5.3% ↓ 5.7% 5.3% ↓

Downtown Fringe 36,938 21.1% 3.4% 2.8% ↓ 3.0% 2.8% ↓

DOWNTOWN 72,258 41.2% 4.6% 4.1% ↓ 4.3% 4.1% ↓

Midtown 16,486 9.4% 5.8% 4.4% ↓ 4.5% 4.4% ↓

CENTRAL AREA 88,744 50.6% 4.8% 4.1% ↓ 4.4% 4.1% ↓

GTA East 33,059 18.9% 9.1% 10.0% ↑ 10.1% 10.0% ↓

GTA North 14,828 8.5% 6.0% 5.9% ↓ 4.7% 5.9% ↑

GTA West 38,682 22.1% 13.6% 14.3% ↑ 14.0% 14.3% ↑

SUBURBAN AREA 86,569 49.4% 10.6% 11.2% ↑ 10.9% 11.2% ↑

TORONTO GTA TOTAL 175,313 100.0% 7.7% 7.6% ↓ 7.6% 7.6% →

This report is provided for information purposes only. The information and statistical data contained herein were obtained from sources deemed reliable. We do not however, assume responsibility for inaccuracies. All opinions expressed

and data provided herein are subject to change without notice. This report cannot be reproduced in part or in full in any format including electronic or printed media, without the prior written approval from Cushman & Wakefield Ltd.

MARKET

AVAILABILITY SNAPSHOT - Q3 2016GTA Office Market (All Classes)

5

STATISTICAL SUMMARY


MARKETBEAT




cushmanwakefield.com

Greater Toronto Area, ONOffice Q3 2016

MARKETBEAT

Economic Indicators

Market Indicators (Overall, All Classes)

Overall Net Absorption/Overall Asking Rent4Q TRAILING AVERAGE

Overall Availability

Q3 15 Q3 1612-Month Forecast

GTA Employment 3.2 mil 3.2 mil

GTA Unemployment 6.9% 6.5%

Canada Unemployment 7.0% 7.0%Source: Statistics Canada

Q3 15 Q3 1612-Month Forecast

Availability Rate 7.7% 7.6%

Net Absorption (sf) 1,204,284 (257,600)

Under Construction (sf) 4,729,498 3,402,833

Average Asking Rent* $38.01 $38.55

*Rental rates reflect gross asking $psf/year

EconomyOntario’s GDP growth remains on track to reach 2.7% in 2016, due mainly to a strong housing sector and healthy job market, which saw the jobless rate dip to an eight-year low of 6.4% in the second quarter. Although export and manufacturing sales continue to post disappointing results, expectations for Ontario’s economic performance remain generally upbeat as we head towards 2017 (RBC Economics).

Market OverviewDowntown office markets continued to power forward in the third quarter, driving the availability rate down to 4.1% -- a low seen only twice since 2008. The quarter’s strong performance was driven by deal making in the triple A towers, and by growth in the fringe markets surrounding the downtown core, where overall availability fell to a 25-year record low of 2.8%. Leading the pack, the Downtown North submarket saw vacancy fall to a seven-year low of 2.2%. These extremely tight market conditions pose a real challenge for companies looking for quality, well-located space. Not surprisingly, this has exerted upward pressure on rental rates, particularly across class B brick and beam and low vacancy existing class A assets.

GTA suburban markets continued to exhibit a flip-flop pattern, with occupied space contracting in the third quarter, following a strong second quarter performance. GTA West saw 380,000 square feet (sf) of new space hit the market over the quarter from six fully vacated buildings returning to market. Absorption fell sharply to negative 266,000 sf from 302,000 sf in the previous quarter, while the overall availability rate rose modestly to 14.3%. The GTA East saw a moderate gain with absorption of 41,000 sf, while softening demand in GTA North contributed to absorption of negative 183,000 sf, its lowest level in nine years, contributing to an increase in the overall availability rate.

OutlookDowntown’s growth momentum is expected to continue; bolstered by expansionary momentum of key sectors such as technology, and by tenants who currently reside outside of the downtown market, but who are looking to be located centrally to tap into the readily accessible talent pool. With a bulge of existing and new product vacancy expected in the GTA West in the fourth quarter, its availability rate is expected to rise. Absorption in the GTA East will likely remain in a moderate-growth pattern over the balance of 2016, driven by a general strengthening of economic conditions.

GREATER TORONTO AREA OFFICE

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MARKETBEAT

Office Q3 2016

Availability All Classes


Leasing Activity All Classes

Sublease Availability All Classes

Absorption All Classes

AvailabilityThe overall availability rate decreased in Q3 to 5.3% from 5.7% last quarter, driven by triple A availability, which fell to 5.1% from 6.8%. Although triple A availability fell by 304,000 sf over the last 5 quarters, class A availability rose by slightly more, leaving the total premium space availability relatively unchanged at 1.5 million square feet (msf).

Availability is expected to increase by 709,000 sf over the next two quarters. This will include 169,000 sf of vacancy at 40 King Street West, arising from Borden Ladner Gervais LLP’s relocation to 22 Adelaide Street West.

Leasing ActivityLeasing activity rose in the third quarter to 582,000 sf from 396,000 sf last quarter, pushing the year-to-date leasing of 2.3 msf ahead of last year’s annual total. Looking forward, leasing is on track to record its best year since 2010.

Triple A leasing of 269,000 sf led all classes in Q3, with over half of the total transacted at 161 Bay Street. The quarter’s large transactions included Capital One’s 112,000-sf deal at 161 Bay Street and CaseWare International Inc.’s 58,000-sf deal at 1 Toronto Street.

Sublease AvailabilitySublet availability increased in Q3 to 389,000 sf from 343,000 sf last quarter. This increase was due to class A, which rose to 145,000 sf from 95,000 sf over the quarter. Total sublet availability is below the 3-year quarterly average of 423,000 sf.

Over the next two quarters, sublet availability is expected toincrease by 76,000 sf. The largest upcoming availabilities will be the Hay Group Limited’s 28,000-sf sublet at 121 King Street West and Stikeman Elliott LLP’s 24,000-sf sublet at 199 Bay Street.

AbsorptionAlthough overall absorption was modest at 38,000 sf in Q3, triple A absorption was a bright spot at 208,000 sf, due to strong demand at 161 Bay Street. The remaining classes of space saw negative absorption, which offset triple A absorption.

The Financial Core’s average quarterly absorption since Q3 2009 has been 56,000 sf, which is about 30% of the Downtown Fringe’s average. The fringe’s higher number of new towers has attracted some tenants from the core. Nonetheless, given the core’s desirable location, absorption should remain modest. Absorption should rise when 100 Adelaide Street West is completed in 2017.

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AvailabilityThe overall availability rate decreased in Q3 to a 25-year low of 2.8%, driven by the class A availability rate, which has fallen to 2.9% from 6.8% in Q1 2014. Furthermore, since Q3 2009, the Downtown South submarket’s class A inventory has increased by 270% to 5 msf, yet its current availability rate is low at 1.5%.

Availability is expected to increase by 295,000 sf over the next two quarters. This includes 37,000 sf to be vacated by MCW Consultant Limited at 207 Queens Quay West.

Leasing ActivityLeasing activity was moderate in the third quarter at 471,000 sf,down from 1.1 msf last quarter. The leasing of class A space was marginally higher than for class B space, with each posting over 200,000 sf in Q3.

The 3-quarter leasing average for 2016 of 693,000 sf is higher than the 5-year quarterly average of 581,000 sf. Shopify leased 34,000 sf at 420 Wellington Street West. Trillium Gift of Life Network leased 33,000 sf at 483 Bay Street.

Sublease AvailabilityOverall sublet availability has declined steadily over the past six quarters, falling by 50% to 150,000 sf. Class A sublet availability has fallen the most over this period, dropping to 88,000 sf from 207,000 sf. Sublet availability in Downtown West saw the largest decrease of all the fringe submarkets since Q2 2015, falling by 112,000 sf to 58,000 sf.

The market is estimated to see 105,000 sf of new sublet availability over the next two quarters. This includes the SNC Lavalin Group Inc.’s 49,000-sf sublet at 120 Bremner Boulevard.

AbsorptionThe Downtown Fringe’s absorption dropped to 99,000 sf from 209,000 sf over the quarter, driven by negative absorption of 57,000 sf in the Downtown West submarket. Downtown North’s absorption of 144,000 sf in Q3 was the best of all the fringe submarkets.

The absorption outlook for 2017 is favourable with additional new supply coming to market. The overall net impact on absorption is expected to be positive as these new buildings are over 90% leased and the amount of the space to be displaced in existing buildings has fallen steadily.

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Office Q3 2016






AvailabilityAvailability decreased in the third quarter to its lowest level in 8 years, falling to 4.4% from 4.5% last quarter. This was driven by the St. Clair submarket’s class B availability, which fell to 3.0% from 3.9%. Midtown’s class B availability has declined by 31% year-over-year.

A total of 287,000 sf of space is expected to return to market over the next two quarters, including a 47,000-sf block at 20 Eglinton Avenue West to be vacated by TD Insurance Meloche Monnex.

Leasing ActivityMidtown’s leasing activity in Q3 fell below 100,000 sf for the first time since Q1 2003, decreasing to 85,000 sf from 176,000 sf last quarter. The decrease was driven by class B leasing in the Bloor submarket, which fell to 7,000 sf from 76,000 sf.

The 3-quarter leasing average for 2016 of 180,000 sf is less than the 5-year quarterly average of 190,000 sf. Portolite Inc. leased 5,000 sf at 245 Eglinton Avenue East. Day Communications completed a renewal for 8,000 sf at 10 Alcorn Avenue.

Sublease AvailabilitySublet availability increased to 139,000 sf from 124,000 sf quarter-over-quarter. The Eglinton submarket comprised 69% of Midtown’s sublet availability in the third quarter. Despite a decrease of about 50% year-over-year, Eglinton’s sublet availability rose by 14,000 sf in Q3.

Almost 41,000 sf of sublet space is expected to come to market over the next quarter, including a 21,000-sf sublet at 625 Church Street.

AbsorptionMidtown’s absorption decreased to 14,000 sf in the third quarter from 66,000 sf last quarter. Weakness in Q3 can be traced to the Bloor submarket, which saw absorption fall for each class of space, resulting in total absorption of negative 24,000 sf.

Midtown’s overall absorption has been positive in each quarter of 2016. If Q4 absorption is also positive, this would be the first year since 2007 to post 4 quarters of positive absorption. However, the absorption has declined in the last 2 quarters. Therefore, low to modest absorption seems likely in the coming quarters.

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AvailabilityThe overall availability rate dipped marginally this quarter to 10% from 10.1% last quarter. Class A availability experienced a minor decrease, which offset a slight increase in both class B and C overall availability.

The GTA East market is expected to see a relatively low amount of space return to market over the next quarter. About 70,000 sf is expected, consisting of a large block of 18,000 sf at 50 MinthornBoulevard, and various other small to mid-sized pockets of space.

Leasing ActivityGTA East saw an increase in leasing activity again this quarter, rising significantly to 621,000 sf from 503,000 sf last quarter. Leasing activity this quarter was driven by the Hwy 404 & Hwy 7 node, which saw an increase of 213,000 sf.

Over the quarter, Maximum Seafood leased 24,000 sf at 50 Leek Crescent, and Morneau Shepell Inc. leased 20,000 sf at 7980 Birchmount Road.

Sublease AvailabilitySublet availability in the GTA East market decreased to 317,000 sf in Q3 from 367,000 sf in Q2. The Consumers Road submarket saw a decrease of 62,000 sf quarter-over-quarter, driving down the overall GTA East sublet availability.

A low amount of sublet space is being tracked to become available next quarter. As a result, overall sublet availability will likely continue to tighten throughout the remainder of the year.

AbsorptionThe GTA East overall absorption remained positive this quarter, but fell to 41,000 sf from 123,000 sf last quarter. This is likely due to the large amount of space that came to market in the quarter, including a 56,000-sf block at the newly completed Aviva Centre at 7980 Birchmount Road.

Given that low amounts of space are being tracked to return to market over the next quarter, it is likely that absorption will remain in positive territory to the end of 2016.

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AvailabilityThe GTA North’s overall availability rate in Q3 increased to 5.9% from 4.7% last quarter, which is near the average rate over the last 3 years. This increase was driven by the A class market in the North Yonge Corridor, which saw over 245,000 sf of space return to market this quarter led by Deloitte’s former premises at 5140 Yonge Street.

More than 310,000 sf of space is expected to become available over the next 2 quarters, including 150,000 sf at the KPMG Tower and 50,000 sf at 5650 Yonge Street.

Leasing ActivityLeasing activity was modest in the third quarter falling to 94,000 sf from 226,000 sf in Q2, well below the 5 year average of 140,000 sf. This was mainly due to the North Yonge Corridor’s class A leasing falling by over 96,000 sf quarter-over-quarter.

Significant transactions completed in Q3 include: the Canadian Institute for Health Information’s 74,000-sf deal at 4110 Yonge Street and MPAC’s 16,000-sf deal at 5775 Yonge Street.

Sublease AvailabilityOverall sublet availability increased to 74,000 sf from 60,000 sf quarter-over-quarter, driven by a 10,000-sf increase in North Yonge Corridor’s class A sublet space.

Sublets as a percentage of overall availabilities have fallen to 8.4% from 15.0% over the past three quarters. Sublet availabilities coming to market are expected to remain at low levels over the next several quarters.

AbsorptionGTA North absorption decreased by over 315,000 sf to negative 183,000 sf from 133,000 sf last quarter. There has not been a decline of this magnitude since early 2008.

The North Yonge Corridor and Vaughan are the key submarkets in the GTA North market fueling absorption growth. Over the next year, 3 new buildings totaling nearly 390,000 sf are expected to come to market in Vaughan. This is expected to keep absorption at moderate levels in the coming quarters.

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AvailabilityThe GTA West market saw a small increase in availability in the quarter, with the rate rising to 14.3% from 14.0% in Q2. The rise was driven by a net increase in class B availability of 228,000 sf, including a number of larger vacancies. This quarter is only the second time since Q4 2014 in which there was no new supply.

Over the next six months, almost 600,000 sf is expected to come to market, of which 177,000 sf is from new supply. As such availability is expected to remain around recent levels.

Leasing ActivityLeasing activity fell to 493,000 sf from 702,000 sf quarter-over-quarter, declining across all building classes. The Airport Corporate Centre & Oakville submarkets were the most impacted, dropping by approximately 55,000 sf each in the quarter.

Other notable transactions this quarter included Oxford College taking 34,000 sf at 1300 Central Parkway West and AmerisourceBergen taking 26,000 sf at 3430 Superior Court.

Sublease AvailabilitySublet availability fell to 805,000 sf from 883,000 sf quarter-over-quarter. There was a 45,000-sf decline in class A sublet space, and the majority of class B sublet space that decreased was the result of two floors totaling 25,000 sf becoming headlease space.

A small amount of new sublease space is tracked to return to market over the next three quarters, with the largest being TD Bank’s 50,000-sf sublease at 1875 Buckhorn Gate in the Airport Corporate Centre.

AbsorptionThe wide swings of the past few quarters continued in Q3, with absorption declining to negative 266,000 sf from 302,000 sf in Q2. This was driven by a 192,000-sf drop in the Airport submarket, of which over 55% was comprised of class A space.

Over the last five years, class B space absorption has averaged negative 50,000 sf per quarter due to lower demand. Absorption will likely remain low until the end of the year, with 486,000 sf tracked to come back to market in Q4. This will likely impact the market, dampening absorption.

0%

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Q3 15 Q4 15 Q1 16 Q2 16 Q3 16

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Q3 15 Q4 15 Q1 16 Q2 16 Q3 16

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0100200300400

Q3 15 Q4 15 Q1 16 Q2 16 Q3 16

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GTA West


MARKETBEAT

About Cushman & WakefieldCushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live.The firm’s 43,000 employees in more than 60 countries provide deep local and global insights that create significant value foroccupiers and investors around the world. Cushman & Wakefield is among the largest commercial real estate services firms withrevenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), globaloccupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, andvaluation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.

Copyright © 2016 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiplesources considered to be reliable. The information may contain errors or omissions and is presented without any warranty orrepresentations as to its accuracy. cushmanwakefield.com

SUBMARKETINVENTORY

(SF)

SUBLET AVAILABLE

(SF)

DIRECT AVAILABLE

(SF)

OVERALL AVAILABILITY

RATE

CURRENT NET ABSORPTION

(SF)

YTD OVERALL NET ABSORPTION

(SF)

YTD LEASING ACTIVITY

(SF)**

UNDER CNSTR

(SF)

OVERALL AVERAGE

ASKING RENT (ALL CLASSES)*

OVERALL AVERAGE

ASKING RENT (CLASS A)*

Financial Core 35,319,185 389,338 1,499,425 5.3% 37,814 398,490 2,337,166 949,131 $53.35 $56.25

Downtown Fringe 36,938,456 150,164 898,486 2.8% 98,692 438,059 2,078,318 1,818,405 $42.37 $46.95

Downtown 72,257,641 539,502 2,397,911 4.1% 136,506 836,549 4,415,484 2,767,536 $47.74 $52.26

Midtown 16,486,181 138,602 580,052 4.4% 13,632 160,116 539,414 0 $41.33 $46.36

CENTRAL AREA 88,743,822 678,104 2,977,963 4.1% 150,138 996,665 4,954,898 2,767,536 $46.57 $51.45

GTA East 33,059,222 316,764 2,983,293 10.0% 41,157 (169,810) 1,441,153 0 $28.84 $30.95

GTA North 14,828,233 74,064 804,822 5.9% (182,978) (73,628) 404,031 385,816 $34.60 $35.75

GTA West 38,681,797 804,734 4,738,123 14.3% (265,917) (88,611) 1,672,678 249,481 $29.69 $31.60

SUBURBAN AREA 86,569,252 1,195,562 8,526,238 11.2% (407,738) (332,049) 3,517,862 635,297 $30.15 $32.09

GTA TOTALS 175,313,074 1,873,666 11,504,201 7.6% (257,600) 664,616 8,472,760 3,402,833 $38.55 $41.90

Key Lease Transactions Q3 2016

PROPERTY SF TENANT TRANSACTION TYPE SUBMARKET

161 Bay Street 112,000 Capital One Lease Financial Core

1 Toronto Street 58,000 CaseWare International Inc. Lease Financial Core

420 Wellington Street West 34,000 Shopify Lease Downtown West

1300 Central Parkway West 34,000 Oxford College of Canada Lease Mississauga Dispersed

483 Bay Street 33,000 Trillium Gift of Life Network Lease Downtown North

130 Queens Quay East 30,000 The Daniels Corporation Lease Downtown South

469 King Street West 30,000 Konrad Group Inc. Lease Downtown West

444 Yonge Street 29,000 Ryerson University Lease Downtown North

Key Sales Transactions Q3 2016

PROPERTY SF SELLER/BUYER PRICE / $PSF SUBMARKET

Scotia Plaza (50% interest) 1,976,690 Dream Office REIT and H&R REIT/AIMCo and Kingsett Capital

$654,500,000 /$662 (adjusted) Financial Core

3000 – 3100 Steeles Avenue East &7065 Woodbine Avenue 235,673 Redbourne Group/

Slate Asset Management LP $57,525,000 / $244 Hwy 404 / Steeles

55 Town Centre Court 218,000Goldman Group and

Lash Group of Companies/55 Towne Centre Holdings

$34,000,000 / $156 Scarborough City Centre

2425 Matheson Boulevard East 187,614OPTrust and Redcliff Realty

Management Inc./Lasalle Investment Management

$47,825,000 / $255 Airport Corporate Centre

461 King Street West 81,091 2143354 Ontario Inc./Allied Properties REIT $82,000,000 / $1,011 Downtown West

*Rental rates reflect gross asking $psf/year** Leasing activity excludes renewals

Source: RealNet Canada Inc.


MARKETBEAT

About Cushman & WakefieldCushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live.The firm’s 43,000 employees in more than 60 countries provide deep local and global insights that create significant value foroccupiers and investors around the world. Cushman & Wakefield is among the largest commercial real estate services firms withrevenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), globaloccupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, andvaluation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.

Copyright © 2016 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiplesources considered to be reliable. The information may contain errors or omissions and is presented without any warranty orrepresentations as to its accuracy.

Key Construction Completions Q3 2016

PROPERTY SUBMARKET MAJOR TENANT COMPLETIONDATE

BUILDING SF(% LEASED)

7980 Birchmount Road Hwy 404 / 7 Aviva Canada Q3 2016 313,476 (82%)

Key Projects Under Construction

PROPERTY SUBMARKET MAJOR TENANT COMPLETIONDATE

BUILDING SF(% LEASED)

One York Street, Toronto Downtown South Sun Life Assurance Company of Canada Q1 2017 944,359 (97%)

100 Adelaide Street West, Toronto Financial Core EY Canada Q2 2017 905,720 (87%)

351 King Street East, Toronto Downtown East The Globe and Mail Q1 2017 500,000 (93%)

100 New Park Place, Vaughan Vaughan KPMG Inc. Q4 2016 352,141 (48%)

130 Queens Quay East, Toronto Downtown South Artscape Launchpad Q2 2018 313,113 (64%)

620 King Street West, Toronto Downtown West Shopify Q1 2019 266,900 (43%)

2727 Meadowpine Boulevard, Mississauga Meadowvale Q4 2016 146,821 (0%)

610 Chartwell Road East, Oakville Oakville MMM Group Q1 2017 102,660 (71%)

Cushman & Wakefield33 Yonge Street, Suite 1000Toronto, Ontario M5E 1S9cushmanwakefield.com

For more information, contact:Stuart Barron,National Director of ResearchTel: +1 416 359 [email protected]

6

STATISTICAL SUMMARY


MARKETBEAT




GTA

FINANCIAL CORE

DOWNTOWN FRINGE DOWNTOWN MIDTOWN CENTRAL

TOTAL GTA EAST GTA NORTH GTA WEST SUBURBAN TOTAL TOTAL

Q1 1,020,000 0 1,020,000 0 1,020,000 0 0 213,547 213,547 1,233,547

Q2 0 0 0 0 0 0 0 279,549 279,549 279,549

Q3 0 0 0 0 0 313,476 0 0 313,476 313,476

Q4 0 0 0 0 0 0 325,816 146,821 472,637 472,637

TOTAL 1,020,000 0 1,020,000 0 1,020,000 313,476 325,816 639,917 1,279,209 2,299,209

Q1 0 1,277,927 1,277,927 0 1,277,927 0 0 102,660 102,660 1,380,587

Q2 949,131 0 949,131 0 949,131 0 60,000 0 60,000 1,009,131

Q3 0 0 0 0 0 0 0 0 0 0

Q4 0 0 0 0 0 0 0 0 0 0

TOTAL 949,131 1,277,927 2,227,058 0 2,227,058 0 60,000 102,660 162,660 2,389,718

Q1 0 0 0 0 0 0 0 0 0 0

Q2 0 286,613 286,613 0 286,613 0 0 0 0 286,613

Q3 0 0 0 0 0 0 0 0 0 0

Q4 0 0 0 0 0 0 0 0 0 0

TOTAL 0 286,613 286,613 0 286,613 0 0 0 0 286,613

Q1 0 253,865 253,865 0 253,865 0 0 0 0 253,865

Q2 0 0 0 0 0 0 0 0 0 0

Q3 0 0 0 0 0 0 0 0 0 0

Q4 0 0 0 0 0 0 0 0 0 0

TOTAL 0 253,865 253,865 0 253,865 0 0 0 0 253,865

* Figures for future quarters are projections based on developments currently under construction

2019

CENTRAL AREA SUBURBAN AREA

2016

2018

2017

TOTAL UNDERCONSTRUCTION

949,131 1,818,405 2,767,536 635,297 3,402,8330 2,767,536 0 385,816 249,481

DEVELOPMENT PIPELINE REPORTSchedule of New Supply - Q3 2016

SUBMARKET BUILDING NAME ADDRESS OWNER/DEVELOPER COMPLETED OFFICE AREA LEASED AVAILABLE

Financial Core Bay Adelaide Centre East 22 Adelaide Street West Brookfield Properties Q1 2016 1,020,000 778,494 241,506

TOTAL OFFICE AREA COMPLETED 1,020,000


Downtown East The Globe and Mail Centre 351 King Street East First Gulf Corporation Q1 2017 483,568 448,501 35,067

Downtown South Sun Life Financial Tower 1 York Street Menkes Developments / HOOPP Q1 2017 794,359 767,631 26,728

Financial Core EY Tower 100 Adelaide Street West Oxford Properties Group Inc. Q2 2017 905,720 788,013 117,707

Financial Core 20 Wellington Street East Concert Real Estate Corporation Q2 2017 43,411 28,629 14,782

Downtown South Daniels Waterfront - City of the Arts 130 Queens Quay East The Daniels Corporation Q2 2018 286,613 182,063 104,550

Downtown West King Portland Centre 620 King Street West Allied Properties REIT Q1 2019 253,865 110,273 143,592

TOTAL OFFICE AREA UNDER CONSTRUCTION 2,767,536


TOTAL OFFICE AREA COMPLETED 0


TOTAL OFFICE AREA UNDER CONSTRUCTION 0

DOWNTOWN TORONTO: CURRENT YEAR COMPLETIONS

DOWNTOWN TORONTO: UNDER CONSTRUCTION

MIDTOWN TORONTO: CURRENT YEAR COMPLETIONS

MIDTOWN TORONTO: UNDER CONSTRUCTION

DEVELOPMENT PIPELINE REPORT Q3 2016Central Area: Downtown Toronto & Midtown Toronto

0


Hwy 404 / 7 Aviva Centre 7980 Birchmount Road The Remington Group Inc. Q3 2016 313,476 257,650 55,826

TOTAL OFFICE AREA COMPLETED 313,476


TOTAL OFFICE AREA UNDER CONSTRUCTION 0


TOTAL OFFICE AREA COMPLETED 0


Vaughan KPMG Tower 100 New Park Place SmartUrban & Calloway REIT Q4 2016 287,141 136,800 150,341

Vaughan Keele Rutherford Corporate Centre - Phase 2 9135 Keele Street Melrose Investments Inc. Q4 2016 38,675 0 38,675

Vaughan 6260 Highway 7 ZZEN Group of Companies Ltd. Q2 2017 60,000 0 60,000

TOTAL OFFICE AREA UNDER CONSTRUCTION 385,816

GTA NORTH: CURRENT YEAR COMPLETIONS

GTA NORTH: UNDER CONSTRUCTION

GTA EAST: CURRENT YEAR COMPLETIONS

GTA EAST: UNDER CONSTRUCTION

DEVELOPMENT PIPELINE REPORT Q3 2016Suburban Area: GTA East & GTA North

0


Meadowvale First Meadowvale Centre III 2476 Argentia Road First Gulf Corporation Q1 2016 100,795 0 100,795

Oakville Great Lakes Business Park Phase III 585 Michigan Drive The Pauls Corporation Q1 2016 76,112 26,000 50,112

Oakville Great Lakes Business Park Phase III 603 Michigan Drive The Pauls Corporation Q1 2016 36,640 0 36,640

Oakville Westbury International Centre 2201 Bristol Circle Westbury Int'l (1991) Corporation Q2 2016 208,380 27,648 180,732

Hurontario Corridor 255 Longside Drive BCC Group of Companies Q2 2016 71,169 20,470 50,699

TOTAL OFFICE AREA COMPLETED 493,096


Meadowvale Gateway Meadowvale I 2727 Meadowpine Boulevard Carttera Private Equities Inc. Q4 2016 146,821 0 146,821

Oakville 610 Chartwell Road East First Gulf Corporation Q1 2017 102,660 72,500 30,160

TOTAL OFFICE AREA UNDER CONSTRUCTION 249,481

GTA WEST: CURRENT YEAR COMPLETIONS

GTA WEST: UNDER CONSTRUCTION

DEVELOPMENT PIPELINE REPORT Q3 2016Suburban Area: GTA West

7

STATISTICAL SUMMARY


MARKETBEAT




LARGE CONTIGUOUS BLOCKS OF SPACE IN GTA

CLASS ADDRESS CONTIGUOUS SF

HEADLEASE/SUBLEASE CLASS ADDRESS DATE TO

MARKETCONTIGUOUS

SFHEADLEASE/SUBLEASE

AAA 40 King Street West 120,020 S AAA 40 King Street West Q1 - 2017 157,484 HA 22 Adelaide Street West (BAC II) 119,079 H A 100 University Avenue Q2 - 2017 48,785 HA 22 Adelaide Street West (BAC II) 102,730 H A 222 Bay Street Q3 - 2017 271,905 H

AAA 181 Bay Street 97,338 H A 320 Bay Street Q3 - 2017 200,804 HA 120 Adelaide Street West 81,961 H A 150 King Street West Q4 - 2017 133,690 HA 70 University Avenue 53,501 H A 95 Wellington Street West Q4 - 2017 51,542 H/S

AAA 333 Bay Street 47,464 H AAA 200 Bay Street (South Tower) Q4 - 2017 47,923 HA 1 University Avenue Q4 - 2017 104,909 H

AAA 200 Bay Street (North Tower) Q4 - 2018 105,330 H

UC 100 Adelaide Street West Q2 - 2017 94,283 H

A 325 Front Street West 99,524 H A 325 Front Street West Q4 - 2016 100,235 HA 250 Front Street West 91,960 H A 120 Bremner Boulevard Q4 - 2016 49,456 SC 384 Richmond Street East 56,100 H A 525 University Avenue Q3 - 2017 58,292 H

A 225 King Street West Q4 - 2017 70,364 HB 393 University Avenue Q3 - 2017 47,132 H

UC 620 King Street West Q4 - 2018 143,592 H

n/a 20 Eglinton Avenue West Q1 - 2017 47,295 H

A 101 McNabb Street 108,385 H A 2255 Sheppard Avenue East Q4 - 2016 57,854 HA 2235 Sheppard Avenue East 82,808 H A 150 Commerce Valley Drive West Q4 - 2016 49,708 HA 3 Concorde Gate 64,548 H A 2206 Eglinton Avenue East Q4 - 2017 129,395 HA 33 Commerce Valley Drive East 66,000 H A 115 Gordon Baker Road Q4 - 2017 74,341 HA 7980 Birchmount Road 55,826 H B 80 Allstate Parkway Q3 - 2017 55,293 HB 1450 Don Mills Road 156,952 H B 2200 Eglinton Avenue East Q4 - 2017 89,519 HC 191 McNabb Street 130,802 H

A 5140 Yonge Street 73,902 H A 5650 Yonge Street Q4 - 2016 50,368 HA 17335 Leslie Street 48,144 H A 5255 Yonge Street Q3 - 2017 93,690 H

UC 100 New Park Place Q4 - 2016 150,341 HUC 7777 Weston Road Q1 - 2017 136,000 HUC 6260 Highway 7 Q2 - 2017 60,000 H

A 2201 Bristol Circle 180,732 H A 1875 Buckhorn Gate Q4 - 2016 49,797 SA 2455 Meadowpine Boulevard 114,760 H B 6655 Airport Road Q1 - 2018 66,745 HA 6715 Airport Road 112,537 H B 2225 Erin Mills Parkway Q4 - 2018 203,866 HA 2476 Argentia Road 100,795 H C 501 Alliance Avenue Q4 - 2016 260,000 HA 7100 West Credit Avenue 70,134 SA 5150 Spectrum Way 88,003 H UC 2727 Meadowpine Boulevard Q4 - 2016 146,821 HA 2660 Matheson Boulevard East 78,571 S UC 2440 Winston Park Road Q4 - 2016 87,170 HA 5015 Spectrum Drive 75,000 HA 6985 Financial Drive 74,104 HA 1 Marmac Drive 68,675 HA 10 Carlson Court 65,616 HA 1122 International Boulevard 59,591 HA 5560 Explorer Drive 51,015 H/SA 100 King Street West (Hamilton) 50,967 HA 255 Longside Drive 50,699 HA 2920 Matheson Boulevard East 50,456 SA 585 Michigan Drive 50,112 HA 1315 North Service Road East 48,552 HA 209 Oak Park Boulevard 48,000 HA 586 Argus Road 46,995 HB 6 Monogram Place 144,099 HB 320 Matheson Boulevard West 92,803 HB 10 Kelfield Street 81,244 HB 77 Belfield Road 65,000 HB 304 The East Mall 63,670 HB 2240 Speakman Drive 54,032 HB 2845 Matheson Boulevard East 53,961 HB 2360 Bristol Circle 50,507 HC 77 Belfield Road 145,000 HC 874 Sinclair Road 84,079 HC 400 Matheson Boulevard West 65,573 HC 2275 Speakman Drive 48,000 H

LEGEND: H - HEADLEASE SPACE, S - SUBLEASE SPACE, UC - UNDER CONSTRUCTION

GTA EAST

GTA NORTH

GTA WEST

CURRENT FUTURE

FINANCIAL CORE

DOWNTOWN FRINGE

MIDTOWN

LARGE CONTIGUOUS BLOCKS IN THE GTA - Q3 2016

8

STATISTICAL SUMMARY


MARKETBEAT




Cushman & Wakefield

Glossary of Real Estate Terms

ABSORPTION

Absorption is a measure of the net change in occupied space over a given period. Positive absorption reflects an increase in occupied space in a market, while negative absorption reflects a decrease.

AVAILABLE SPACE

Available space is the total available space currently marketed for occupancy as of the end of the quarter. (Both Headlease and Sublease space are included).

AVAILABILITY RATE

This indicator measures the percentage of total available space that is currently marketed and available for occupancy as of the end of the quarter.

CLASS “AAA” OFFICE SPACE

A city’s most prestigious or select Class “A” buildings, generally known as the “Bank Tower” in the Financial Core of Toronto. These buildings are further distinguished by their dominance and recognition as the highest profile office buildings in the city.

CLASS “A” OFFICE SPACE

Class “A” office buildings typically have a modern and superior quality of exterior curtain walls, state of the art mechanical, electrical and life safety systems and a high quality interior finish. These more prestigious office buildings are typically occupied by the city’s premier office users and have a definitive market presence. Given all the above, Class “A” buildings command premium rents.

CLASS “B” OFFICE SPACE

Class “B” office buildings commonly have acceptable (but not outstanding) curtain wall finishes, adequate (but not state of the art) mechanical, electrical and life safety systems and a mid-quality level of interior finish. Class “B” buildings compete for a wide range of users, at average rents for their market area.

CLASS “C” OFFICE SPACE

The curtain walls and the mechanical, electrical and life safety systems of Class “C” buildings are generally somewhat outdated and the quality of the finish is often below average. These buildings commonly compete for tenants requiring functional space at below average rents.

DEMAND FACTOR

Demand factor measures the percentage increase or decrease in net occupied space or absorption (absorption expressed as a percentage) to a previous quarter or time period.

Cushman & Wakefield

Glossary of Real Estate Terms

FUTURE 6-MONTH AVAILABILITY RATE

This indicator measures the percentage of total square footage of space that will become available for occupancy in the next six months.

GROSS RENT

The net rent plus applicable taxes and operating costs.

GROSS LEASABLE AREA

This refers to the total area within a retail or office property that is available for lease to tenants and upon which tenants pay rent. A property’s GLA is usually expressed in square feet.

INDUCEMENTS

Incentives offered to a tenant by a landlord, which reduce the cost of occupancy. Inducements may include periods of free rent, capital improvements, allowances, etc.

NET EFFECTIVE RENT

Net rent minus the value of applicable tenant inducements.

NET RENT

The quoted rental rate (without taxes and operating costs) which may be subject to negotiation.

OFFICE SERVICE/FLEX SPACE

One storey buildings designed for 20-100 percent office use and typically with ceiling heights between 12 and 25 feet. These buildings usually have walls that can easily be broken down in order to accommodate the needs of individual users.

QUOTED RENT

The quoted or asking rental rate.

PSF (psf)

Per square foot.

SURVEY BUILDING

Buildings greater than 20,000 square feet of office space which have as their primary function the provision of office space (i.e., 75 percent office and 25 percent other uses).

Cushman & Wakefield Copyright 2016. NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IS MADE TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED HEREIN, AND SAME IS SUBMITTED SUBJECT TO ERRORS, OMISSIONS, CHANGE OF PRICE, RENTAL OR OTHER CONDITIONS, WITHDRAWAL WITHOUT NOTICE, AND TO ANY SPECIAL LISTING CONDITIONS IMPOSED BY THE PROPERTY OWNER(S). AS APPLICABLE, WE MAKE NO REPRESENTATION AS TO THE CONDITION OF THE PROPERTY (OR PROPERTIES) IN QUESTION.

third quarter 2016 research report - cwmarketing.ca · office q3 2016 marketbeat economic...

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