According to a new report from Cushman & Wakefield, Toronto is expected to add over 1.59 million square feet of triple-A office space in 2014 – nearly twice as much as the Big Apple.
And as it turns out, investors snapping up REITs have helped spur the boom in commercial development for Canada’s largest city. In comparison, New York City, projected to add about 916,000 square feet of commercial space next year, has lagged behind Toronto in attracting those increasingly important investment trusts.
Public offerings raised $5.12 billion last year alone, and several large Toronto-based REITs purchased commercial buildings in the city as a result.
Pierre Bergevin, CEO of Cushman & Wakefield in Canada, says the rising demand in office space will keep prices high for the foreseeable future. That poses a challenge to investors of all stripes now scouting around for properties.
“It’s expensive right now and this kind of office space should command a premium for the next few years until much more supply comes onto the market,” he said.
Prices have been rising steadily since 2009, a fact not expected to change anytime soon. Also up is the number of commercial sales, which reached the record high of $13 billion last year – a 73 per cent increase from 2009.
Toronto’s famed two seasons – winter and construction – are in full swing. Toronto currently has more high rises under construction than any other city in the world. By 2017 it is estimated ten high-rise towers will open in the city, which will draw the offices of businesses such as Google Canada and Coca Cola further into the city core. Until then, the limited supply and increasing demand will prove office space to be a lucrative option for investors.
The vacancy rate for commercial space was 5.1 per cent in 2012, and is expected to rise to 7.6 per cent next year as more inventory becomes available.
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