Q4 2023: Toronto Office Market Report
For the fourth quarter of 2023, there has been a minor increase in office vacancy rates, in the sub-one percent levels. Net rents increased marginally and, for the fourth quarter in a row, vacancy rates also increased moderately.
Many of the developments coming on to the market in 2024 and beyond have not been pre-leased. This will have a major impact on vacancy rates increasing. The increase is partly due to new buildings staying empty, though it is important to note that in Class A buildings, the vacancy rate is lower, as many companies have made the flight-to-quality. With a shift in the economy and a recession looming, depending on the industry, companies are expected to enforce mandates asking employees to come into the office more often.
Looking ahead, tenants will likely be looking for built-out spaces to avoid high construction costs and potentially sign with a space that is ready for move-in, rather than waiting for more work to be done. Vacancy rates are expected to continue increasing, as they have since the onslaught of the pandemic. Tenants are anticipating that costs will remain the same, though landlords are feeling the pressure to be creative to get deals done, and potentially offering more inducements.
Many of the developments coming on to the market in 2024 and beyond have not been pre-leased. This will have a major impact on vacancy rates increasing. The increase is partly due to new buildings staying empty, though it is important to note that in Class A buildings, the vacancy rate is lower, as many companies have made the flight-to-quality. With a shift in the economy and a recession looming, depending on the industry, companies are expected to enforce mandates asking employees to come into the office more often.
Looking ahead, tenants will likely be looking for built-out spaces to avoid high construction costs and potentially sign with a space that is ready for move-in, rather than waiting for more work to be done. Vacancy rates are expected to continue increasing, as they have since the onslaught of the pandemic. Tenants are anticipating that costs will remain the same, though landlords are feeling the pressure to be creative to get deals done, and potentially offering more inducements.