Downtown Toronto office vacancy rate will surpass 12% in 2021
With thousands of Torontonians working from home, the downtown Toronto office vacancy rate is expected to grow even more by the end of this year.
According to CBRE’s new 2021 Real Estate Market Outlook, downtown Toronto office vacancy will rise to 12.4% this year — a noticeable increase from 2020’s 7.2% and 2019’s 2.2%.
Toronto’s suburban areas also saw an increase in the office vacancy rates, going from 11.8% in 2019 to 15.3% in 2020 to an anticipated 17.5% in 2021.
“It is anticipated that we could see some space reduction as [work from home] is more formally adopted, however we are just as likely to see footprints grow as occupier’s de-density their space and increase their space per-employee,” the report reads.
Prices for Toronto’s office rentals are “anticipated to hold near current levels in the year ahead” due to the “institutional nature of office tower ownership in Toronto,” the report says.
The last year was incredibly tough on Toronto’s retailers due to continual economic uncertainty, but the report predicts that many segments of the retail sector will thrive this year, including grocery stores, cannabis stores, dollar stores, and fast-food chains with drive throughs.
“With many of the same obstacles continuing into the year ahead we will see more retailers fight against closures and bankruptcy,” the report reads.
Retail sales actually saw a growth last year of 6.4% and are expected to grow another 10.4% this year.
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Toronto’s industrial market, which had started to establish momentum in recent years, is expected to do well in 2021.
“As a result of demand from a multitude of industries and a highly pre-leased development pipeline, it is expected that a lack of available space will lead to continued rental rate growth this year,” the report says.
The asking price per square foot in industrial buildings is expected to increase from $10.25 in 2020 to $11.45 in 2021.
The report also took a look at Toronto’s multifamily real estate market and is forecasting a lower vacancy rate and higher rent prices. In 2020, the vacancy rate was 3.4% and the average two-bedroom was priced at $1,635. In 2021, CBRE predicts the vacancy rate will drop to 2.3% and two-bedroom rentals will rise to an average of $1,725.
The amount of housing for seniors is also expected to go up this year, as is the average rent price for them. The number of available spaces is projected to reach 15,600 and will cost an average of $3,975. In 2020, there were 14,180 spaces at an average rate of $3,899.
Even with the changes the market has seen over the past year, CBRE Canada Vice Chairman Paul Morassutti remains hopeful for the country’s real estate future.
“Despite current challenges Canadian commercial real estate offers many reasons for optimism and we are in a better position to capitalize on what comes next than many of our global competitors,” said Morassutti. “Canada’s economic and political stability and thoughtful immigration policies are a launchpad for growth and we expect to see a real pop in the economy before the end of the year.”
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