The impact of hybrid work continues to reverberate in the GTA office market
Market pressure continues to ease in the Greater Toronto Area (GTA) office sector amid a growing tenant preference for the flexibility afforded by hybrid work set-ups, according to Avison Young.
“Changes in the way we work continue to put downward pressure on the volume of square footage leased across the GTA, as tenants right-size, downsize, consolidate, and relocate their real estate needs,” Avison Young said.
The region’s office availability rate also continues its upward trend, rising to 17.8% during the first quarter of 2023. This represented a quarterly increase of 130 basis points.
“As it has since 2020, the availability rate continued to rise in all districts across the GTA,” Avison Young said. “Both direct and sublease availability trended upward once again.”
As of Q1 2023, more than 35 million square feet of office space was available for lease in the GTA.
“Many tenants are taking advantage of the opportunity to secure better (and sometimes bigger) premises for their businesses,” Avison Young said. “As some users shed space, the range of options benefits those looking to upgrade.”
Such a flight to quality will benefit class A assets, particularly those that are strategically located near transit hubs.
“Owners of other buildings will be assessing their strategies to remain competitive in attracting and retaining tenants – and looking for ways to differentiate their assets in the marketplace, such as building amenities or lobby renovations,” Avison Young said.
Built-out spaces will also prove to be among the most attractive choices for occupiers.
“High construction costs, shorter lease terms, and uncertainty about the future are motivating many tenants to look for spaces that are move-in ready – such as model suites, turnkeys, and well-built-out and furnished sublease spaces – to save on time, stress, and capital,” Avison Young said.