Toronto’s Downtown Office Market Is On Fire!


7 minute read

June 15, 2018

Let’s take a little break from residential real estate, just for a day.

Although to be fair, residential real estate in the downtown core and commercial/office space are joined at the hip.

As more and more businesses move downtown, so too will the people that they employ.

Would it surprise you to know that commercial office space vacancy is near an all-time low?  It shouldn’t…


Do you remember something called…………the stump?

I do.

And perhaps you will too, with just a little reminder.

But let me flush this quiz out a little longer.

Which downtown Toronto office building would you say is the most noteable?

Is it Scotia Plaza?  The iconic and unmistakeable maroon tower that sold for a well-publicized $1.27 Billion in 2012?

Is it BCE Place, now “Brookfield Place,” which gives us both the Bay Wellington Tower as well as the better-known TD Canada Trust Tower, with the “TD” logo adorning the top of the building in bright green?

Or maybe, just maybe, it’s the new(er) Bay Adelaide Centre, which is probably the newest, shiniest, and brightest (both in literal and metaphorical terms) downtown Toronto office tower.

Well, if you knew where I was going with “the stump,” then you knew that my answer to the question above has already been answered.

As red as Scotia Tower is, and as tall and overbearing as TD Tower is, I have to think that the Bay Adelaide Centre is the most noteable office structure at the moment, and perhaps that’s because it’s actually two towers (like TD), and there is a third on the horizon.

Maybe it’s because “Suits” was filmed in there!

Or because of the podium-style lobby, with sleek glass, and a very large extended sidewalk on the northeast corner of Bay & Adelaide that is somewhat reminiscent of a Manhattan-style office setup.  All that’s missing is a slew of one-way street, and yellow taxi cabs.

If you’re over the age of 40, I’m sure you can recall “the stump” that sat on the current site of the Bay Adelaide Centre for over a decade.

For those that don’t know, there were plans for an office tower on the current site of the Bay Adelaide Centre back in the late 80’s, and into the early 90’s, but then a massive recession hit, and having constructed underground parking already, the only above-grade structure completed was this:

(Photo from Wikipedia)

That “stump” remained intact for nearly 15 years.

I actually recall a Globe & Mail article from before construction started on the Bay Adelaide Centre…

……….wow, I found it!  Read it here: “End Nears For Toronto’s Bay Adelaide ‘Stump'” – July 19th, 2006.

That was an incredible find, if I may say so.  There’s nothing quite like digging through a trillion web pages on Google.

Here’s another description of the stump, this one from Wikipedia:

Construction began in 1990, but the developers soon ran into problems. The economy went into recession and office vacancy rates in Toronto rose to 20%. Construction was halted, and in 1993, with over $500 million already invested, the project was permanently put on hold. All that was completed was the underground parking garage and several storeys of the concrete service shaft that stood from 1991 onwards, as a monument to the failed project in downtown Toronto. The stump of the service shaft was known to security and the locals as “the bunker” or simply “the stump”. The parking garage was in operation, and the stump itself was used as a surface on which to mount advertisements.

Circle back to the Globe & Mail article from 2006, and note that the downtown office vacancy rate was 6.8%.

And what are vacancy rates today, you ask?

How about 2.4%.

Wow!  2.4%!  That’s………..double the vacancy rate in the rental market!

Kidding, kidding.  Let’s not go to the rental market today, we’re liable to be here all night.

One of the websites I frequent in order to keep on top of news in commercial real estate (since it’s not like the Globe & Mail and Toronto Star are doing weekly round-ups about office space) is a site called The Real Estate News Exchange, or RENX.

Today, they provided the following about the downtown Toronto office market:


Toronto CEO “All In” On Downtown Toronto Office Market
By: Don Wilcox

With two major office projects which will deliver more than two million square feet of space to the market, Cadillac Fairview CEO John Sullivan says his company is “all-in” for downtown Toronto.

“We’re excited,” he told RENX in an interview Wednesday. “We’ve got two very large developments going on in downtown Toronto and we’ve got 10 million square feet here already. So we’re all-in for Toronto.”

Sullivan was speaking just a few hours after announcing CF’s latest downtown development, a 46-storey office tower at 160 Front Street West in conjunction with Investment Management Corporation of Ontario. When shovels go into the ground in January, it will be Cadillac Fairview’s second major office tower to begin construction in just over a year.

CF is already building the 33-storey 16 York just a few city blocks away.

The $800-million Front St. tower includes 1.2 million square feet of office space, while 16 York contains about 878,000 square feet. It was projected to cost about $479 million.

“We’re excited about this project, we’re excited about 16 York and looking forward to a successful lease-up of both,” Sullivan said.

The most recent figures peg Toronto’s downtown office availability rate at a very tight 2.4 per cent (via Cushman & Wakefield). Any existing significant office projects which will be delivered prior to 2020 are already up to 90 per cent preleased, leading most observers to predict at least two more years of limited availability.

Sullivan said the ongoing restriction in the downtown Toronto market dictated the timing of 16 York and 160 Front St., which are both premium projects. Plans for the Front St. tower were actually filed with the city about four years ago, so CF faced a decision back in 2016 on which project to proceed with first.

“At that moment in time, we had both projects ready to go and we decided to go ahead with 16 York. If you recall, we went ahead without any preleasing,” Sullivan said. “16 York is the smaller of the two projects, so that was a conscious decision.

“We are a year into it right now and if you go by the site I think we are on the third floor right now, coming out of the ground. We’ve had an enormous amount of interest and a lot of success in preleasing there.”

First National Financial will be one of the anchors at 16 York, he said, and one other key tenant is also signed, though Sullivan said that deal remains confidential.

“We have a few other ones that are about to be signed, such that we will be well in excess of half leased in a short period of time,” he said. “(Leasing) has gone extremely well. We’re not even going to be finished this building until 2020. And the new one we’re not going to finish until 2022.”

At 160 Front, meanwhile, the Ontario Teachers’ Pension Plan was announced as the first anchor tenant. The OTPP, which also owns CF, will take nine floors of the tower, or about 21 per cent of the total office space, Sullivan said.

Although there are no other firm commitments at this point, but Sullivan said there has been strong interest in the project during its planning stages.

“It would be safe to say we’ve had discussions with a number of larger tenants. At this stage we are not interested in renting one floor, we’re looking at a much larger space,” he explained. “There is lots of interest. To be frank a number of them were waiting to see if we were going ahead with it. Now that we are, I think those discussions will accelerate.”

He said there are several major factors driving the Toronto office boom, and none of his “top three” show any signs of slowing down.

“One I would call the flight from the suburbs back downtown. There’s a number of office tenants that either left downtown and went to the suburbs that are coming back, (or) in some instances office tenants that have always been in the suburbs that feel now they have to be located somewhere in the downtown area,” Sullivan explained.

“You also have the technology space. An enormous amount of growth. You have tenants that start out with one floor and five years later they are 10 floors. You have a massive amount of growth in that space and they all want to be downtown.

“Finally, the one which has been really a bellwether for Toronto over the years is the financial services sector. They continue to grow.

“So when you put those three together alone, I think they are responsible for a large part of the strong market which you see today.”

With the addition of 160 Front, the 72-million square foot Toronto office market will see a significant addition of new, premium space from 2020-2023.

The delivery times for these two towers are similar to another massive downtown project, the 81 Bay CIBC Square development by Ivanhoe Cambridge. That will deliver 1.5-million square feet into the downtown with the completion of the first 49-storey tower in 2020, and a second, 1.4-million square foot tower is slated for delivery in 2023.

Like those competing towers, both CF buildings are being constructed to meet LEED Platinum and WELL certification requirements. Sullivan trumpeted Cadillac Fairview’s ongoing sustainability and wellness programs and commitments throughout its portfolio, and said both projects will echo that philosophy.

Although the exterior of 160 Front might be very similar to the design presented in plans filed four years ago at city hall, the interior will be anything but.

“Technologically every year that goes by we improve that. So as we sit here today the technology that will be implemented at this project will be state of the art,” Sullivan said.

“We’re leaders in that (sustainability) space and we’ve also been a leader in our Green at Work program, which is the whole sustainability side, which kind of overlaps both WELL and LEED. This (building) will be a key part of that program.”



There’s a lot to discuss after reading the article above, but one thing really jumps out at me.

In the 2006 Globe & Mail article, it was noted that the three additional office towers being built would “push the vacancy rate up to 10.6%” from a 3.9% projected rate in 2008, but an actual 6.8% rate in 2006.

The RENX article says the following:

Any existing significant office projects which will be delivered prior to 2020 are already up to 90 per cent preleased, leading most observers to predict at least two more years of limited availability.

Well no kidding.

It’s hard to add vacant units to the marketplace when they’re already pre-leased!

When condominiums are completed, they’re quite often rented out.  Investors who purchased units in pre-construction will lease the unit out during occupancy and registration, which can sometimes take up to two years.  So when most new downtown condominiums are completed, we often see 20%-30% of the units come up for lease.

I never thought I’d say this, but it seems as though the lease market for downtown office space is perilously tight, as is the lease market for residential.

Now what does this say for the future of the downtown condo market?

When I was on the Toronto Life panel two weeks ago, somebody in the audience asked about the future of condo prices, “If more and more businesses are moving out of the city, and if ‘working-from-home’ becomes a go-to employment model.”

Perhaps the question should have been the exact opposite.

With big-tech on the rise in Toronto, Google Sidewalk Labs on the horizon, and ten million square feet of new office space planned for the downtown core in the next decade, won’t the employees who work for these firms need some place to live?

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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  1. JL

    at 10:13 am

    What about the unfinished BMO tower platform at NW corner of Bay and King?

  2. Professional Shanker

    at 10:15 am

    David, interesting question you pose – what is the future of the workplace. My bet is that telecommuting will become more prominent but the office (meeting place) will concentrate even further to the core of larger cities. I do not understand how this opinion/eventual shift is even debatable but I understand some are resistant to change (I can just here someone saying 10 years ago that they don’t trust purchasing things over the net! – lol).

    How that will affect condo prices, not sure!

    1. Natrx

      at 11:27 am

      Hotelng will continue, but the largest job market growth since the recession has been in Tech, which actually is the only major segment that has increased office usage per employee. Also, even with hoteling, they are substituted with larger meeting spaces negating the ‘loss’ of office space. As long as investment levels remain strong, demand for office space is there. Many companies in the suburbs have been relocating to the core to take advantage of the increased office construction as they seek to attract the Millennial work force (Tim Horton’s is one example but there are countless others). Immigrants keep pouring into Toronto (more than half of Canada’s went to 1 city). Suffice to say, the downtown Condo market will stay strong for a very long time.

  3. Ralph Cramdown

    at 1:02 pm

    So much to love about this post…

    First, it talks about the Stump, which was a really great Toronto hoodoo for a long time.

    Second, it’s mainly about Teachers, which has generally proven to be a great steward of capital. But then again, it’s in their capacity as a commercial real estate developer, and students of history know that to be an urban commercial developer is to wear a sign that says “Kiick Me, for I am REALLY bad at timing market cycles.” Exhibit A is that they had two projects on the drawing board, and chose to build the smaller one first, thus markedly increasing the odds that they’d be developing a bigger project later in the cycle. B is that if you cut through all salesman Gil’s patter, barely any of the space is as yet leased to arms’ length tenants, and the only one they can name has a BBB credit rating — Not that there’s anything wrong with that!

    You can buy see-through office towers in Calgary today at good prices. Or you can buy HBC (hell, Teachers could buy the whole company) and get great real estate at a big discount, or you can develop in downtown Toronto (at the top of the cycle?) and hope.

    N.B. Builders almost never add vacant space in the buildings they construct, but Teachers’ move to downtown is going to leave a big gob of class A space at Yonge & Finch for Manulife to fill (if it ain’t one pension company, it’s another, eh?)

    1. Appraiser

      at 7:00 pm

      Yeah, right-on Ralphy,

      With an office vacancy rate of next to zero, that “big gob” of space at Yonge and Finch will never be filled, right? Oh the horror!

      By the bye, what evidence do you have to indicate that we are at the “top of the cycle” ? Asking for a friend.

      Incidentally, what’s with the obsession of being so angry, constantly negative and perpetually wrong?

      1. Ralph Cramdown

        at 7:17 pm


        1. Appraiser

          at 10:06 am


    1. Ralph Cramdown

      at 12:45 pm

      He had me at “Silicone Valley.”

  4. Sardonic Lizard

    at 4:55 pm

    More offices in the downtown core? Come on, people. I thought developers were smarter than this.

    Why not build or set up offices in the less congested parts of town that are just as easily serviced by public transit and bike lanes? I get the attractiveness of multi-tenancy office buildings, but there are other, more desirable office settings.

  5. Norma Burk

    at 4:23 am

    Your post captures the pulse of Toronto’s downtown office market perfectly – it’s truly on fire! The surge in demand and the competitive nature of the market is an exciting development. The detailed insights you’ve provided about rising leasing activity, limited vacancies, and the impact of remote work trends on the market are both informative and intriguing. Toronto’s downtown area has always been a hub of business activity, and your post sheds light on how it’s evolving even further. The inclusion of statistics and expert opinions adds credibility and depth to your analysis, making it a valuable resource for anyone interested in the real estate and business landscape. As someone who follows market trends closely, this post has definitely caught my attention. It’s an engaging and insightful read that highlights the dynamism of Toronto’s downtown office market. Thanks for sharing this comprehensive overview – it’s a great snapshot of the current state of affairs!

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