Prominent office leases signed by Celestica, H.H. Angus and Payment Solutions Providers Services negotiated by top dealmakers from Metrus Properties are among the third-quarter office leases recognized by CoStar.
As big-ticket items involving sizable investments, commercial property transactions often have a wider impact within the community. CoStar will recognize the largest leases completed each quarter and the dealmakers who made them happen in their respective markets.
Here are the Greater Toronto office leases selected as the third-quarter 2023 winners of the CoStar Power Broker Quarterly Deal Awards:
Brokers Involved:Ā Gabrielle Mair of Metrus Properties represented the landlord.
Deal Commentary:Ā After Toronto-based electronics manufacturing services firm Celestica Inc. entered into an agreement earlier this year to sell its Don Mills property, which includes the site of its corporate headquarters and its Toronto manufacturing operations to a special purpose entity formed by a consortium of three real estate developers, Diamond Corp., Lifetime Developments and Context Development Inc. The consortium plans to work with Toronto officials to win approval for a mixed-use redevelopment that includes office, retail and residential uses, Celestica entered into an interim lease for its existing head office and manufacturing premises on a portion of the real estate for an initial two-year term on a rent-free basis subject to certain payments including taxes and utilities. In the third quarter, the tech firm secured replacement space by signing a long-term lease for the 8th and 9th floors in a new office tower at Don Mills and Eglinton to be developed by Metrus near a Metrolinx Station in Crosstown Place, a new master-planned encompassing 60 acres. However, on the day it leased the space, Celestica subleased it to H.H. Angus, which leads us to the next deal.
Brokers Involved:Ā Gabrielle Mair of Metrus Properties represented the landlord.
Deal Commentary:Ā Celestica subleased the two floors it had in a soon-to-be-completed office building at 1176 Eglinton Ave. The space is expected to serve as a head office for H.H. Angus, an employee-owned, independent consulting firm of engineers, technical specialists and project managers.
Brokers Involved:Ā Gabrielle Mair of Metrus Properties represented the landlord.
Deal Commentary:Ā Payment Solutions Providers Services, which assists clients to design, deploy, and manage secure networks and transaction routing for processing online transactions, renewed its lease to occupy just under 40,000 square feet of office space at 400 Applewood Crescent in Vaughan. The office building is owned by Concord, Ontario-based Metrus Properties.
Brokers Involved:Ā David Fullerton, Allen Brusilow and Matthew McCusker of JLL represented the landlord.
Deal Commentary:Ā Law firm Koskie Minsky LLP renewed its lease for two full floors in the Cadillac Fairview Tower in a third-quarter deal. This Cadillac Fairview-owned office property in downtown Toronto is located near the CF Eaton Center shopping center.
Brokers Involved:Ā Patrick Langdon of Langdon Partners Limited represented the landlord.
Deal Commentary:Ā In a top third-quarter deal, Swift Office signed a lease in the Madison Executive Centre. The 24-storey office property situated in downtown North York is owned by Europro, a commercial property management company that has expanded to managing real estate assets in 10 cities province-wide.
Higher Rates, Slower Economic Outlook Keeps Supply Growth in Check
The spike in demand for modern logistics space in recent years has led to more projects breaking ground. Yet the new supply pipeline remains disciplined.
In fact, under-construction projects as a percentage of inventory have declined in 2023 relative to last year. This decline occurred even as construction costs for warehouses fell across all Canadian major metropolitan areas. The higher interest rate environment and signs that the countryās economy continues to decelerate likely explain, in part, why new supply growth is moderating. This disciplined supply pipeline should help the sector weather any bumpiness that could occur from a potential recession.
With e-commerce demand pulled forward thanks to the pandemic and more resilient supply chains put in place by many companies to address goods shortages, overall demand for modern logistics space in Canada was exceedingly strong over the past few years. This demand can be seen in the availability rates for industrial space across markets. Although space availability has risen as new supply is delivered to market, it has remained at or below long-term trend levels in most cities.
This strong demand growth and limited availability of modern industrial space led developers to break ground on new projects. In fact, under-construction stock as a percentage of existing inventory increased rapidly across Canadian markets between 2020 and 2022.
This rapid rise in warehouse construction also helped lead to a jump in construction costs. These costs were also affected by a jump in apartment construction activity and a more generalized increase in wage pressures, as labour shortages in many parts of the economy became commonplace. However, since 2022, warehouse construction costs have been falling across all Canadian markets. The fall in prices has been rapid. In Montreal, for example, warehouse construction prices were growing at over 22% annually as of the fourth quarter of 2021; since then, cost growth has fallen to 10% as of the second quarter of 2023.
Still, warehouse construction costs remain well ahead of inflation as measured by the consumer price index. At the same time, interest rates remain at elevated levels compared to the recent past, making it harder to finance new projects. This environment is making it more difficult for developers to make their pro forma numbers work. As such, development activity, while still solid, has started to moderate in major markets compared to a year ago. The countryās lackluster economic performance since the rate-hiking cycle began may also be causing some developers to pause. In nominal terms, Canadaās economy has been flat for the last three quarters, although adjusting for inflation, the economy has already started to shrink slightly.
Although construction activity has started to moderate, developers are still obtaining permits to build new warehouses at a faster rate than before the pandemic. For example, in Toronto, around four permits per month are issued to build new warehouse developments as of mid-2023, which is higher than the three permits per month issued before 2021. Still, the level of permitting has declined substantially from the five to seven permits per month that were issued between 2021 and 2022.
Although new supply is controlled in large cities, one area for concern is smaller cities in Ontario, outside of the Greater Toronto Area, or GTA. Permits per month for new warehouse construction are relatively steady in British Columbia, Alberta, and Quebec when comparing current monthly levels to those of 2019. However, permitting in Ontario jumped in 2021 and remains elevated, in contrast to the declining trend for Toronto. This suggests that many smaller cities outside the GTA could see increased levels of warehouse construction in the coming quarters.
Much of this permitting activity is likely in the Greater Golden Horseshoe, or GGH, a large swath of territory that surrounds the GTA on the Southwest, North, and East. Developers have been breaking ground in many smaller cities of the GGH as industrial land availability in the GTA becomes harder to find. This could potentially leave some of these smaller GGH areas at risk of oversupply in the event of an economic downturn.
Despite more affordable construction prices, the industrial supply pipeline remains relatively disciplined, although one area for concern for oversupply could potentially be smaller cities outside of the Greater Toronto Area. This discipline is partly due to higher financing costs related to the rapid rise in the countryās interest rates, coupled with greater caution with respect to Canadaās near-term growth prospects. In addition, although warehouse construction costs have come down, they do remain elevated. Together, these factors help explain why the countryās construction pipeline for new industrial product remains under control. The fact that new supply does not appear to be getting ahead of existing demand suggests that the industrial sector is likely well-positioned to weather an economic downturn when it arrives.
Prominent industrial leases signed by Lactalis Canada, The ProLift Rigging Company Canada and Stage Windows and Doors negotiated by top dealmakers from CBRE and Colliers are among the third-quarter industrial leases recognized by CoStar.
As big-ticket items involving sizable investments, commercial property transactions often have a wider impact within the community. CoStar will recognize the largest leases completed each quarter and the dealmakers who made them happen in their respective markets.
Here are the Greater Toronto industrial leases selected as the third-quarter 2023 winners of the CoStar Power Broker Quarterly Deal Awards:
Brokers Involved:Ā Kyle Hanna and Fraser McKenna of CBRE represented the tenant.
Deal Commentary:Ā In one of the largest industrial deals of the third quarter, Canadian dairy product producer Lactalis Canada Inc., the company behind such popular brands as Cracker Barrel, Black Diamond, Balderson, Astro and Lactantia preleased a new distribution facility in Oshawa, east of Toronto. The company, a subsidiary of France-based Lactalis Group, signed a long-term lease for a new 379,000-square-foot distribution centre atĀ 1680 Thornton Road NorthĀ that is set to open in the fourth quarter of 2024 being developed by Montreal-based Broccolini and designed by GKC Architecture and Design. “Lactalis Canada’s new facility in Oshawa will become the largest distribution centre, from a capacity standpoint, for Lactalis Group globally,” said Mark Taylor, president and CEO of Lactalis Canada, in a statement. “This bold step exemplifies Lactalis Canada’s growth ambitions in Canada as a dairy leader and, more importantly, reinforces our continued commitment and investment in the country and communities in which we operate.” The new facility will be used to consolidate multiple shipping locations the company operates serving its cheese and tablespreads category, including an internally operated centre in Belleville, Ontario.
Brokers Involved:Ā Kyle Hanna, Pat Viele and Frank Protomanni of CBRE represented the landlord. Colin Alves of Colliers represented the tenant.
Deal Commentary:Ā In another large industrial prelease signed in the third quarter, a rigging company agreed to prelease a new warehouse under construction in Brampton set to reach completion in March 2024. The tenant, ProLift Rigging, is based in Lynchburg, Virginia, and provides lifting, rigging, and relocation services.
Brokers Involved:Ā David Hoffman and George Siotas of Colliers represented the landlord.
Deal Commentary:Ā Stage Windows and Doors, a company that manufactures energy-efficient windows and doors, struck a deal in the third quarter to lease more than 126,000 square feet in this warehouse facility in Vaughan, Ontario, owned and managed by Manulife Financial Corp.
Brokers Involved:Ā Fraser McKenna and Mike McFarlane of CBRE represented the landlord.
Deal Commentary:Ā Stephenson’s Rental Services, a fast-growing equipment rental services company, struck a deal in the third quarter to lease Amdev Property Group’s manufacturing building at 35 Bertrand Ave. in eastern Toronto.
Uncertainty about asset prices is expected to remain a key factor limiting transaction volumes, while deals that do proceed will likely be smaller as large investors pull back from the market and less capital is available for real estate acquisitions.
That was one of the major observations featured inĀ PwCĀ andĀ Urban Land Instituteās just-released 2024Ā Emerging Trends in Canadian Real EstateĀ report, which was augmented by a presentation from PwC Canada national real estate leader Frank Magliocco and a panel discussion involving industry leaders at TorontoāsĀ The CarluĀ on Nov. 14.
The findings came from interviews with 209 Canadian real estate executives, who by and large werenāt as optimistic as those who had contributed to the previous yearās report.
A prevailing theme was that companies will be cautious and move slowly, with some pauses in investment and development, over the next year or two until they see more certainty in the market.
Allied and Fengate being cautious
Allied Properties REITĀ (AP-UN-T) is one of those cautious real estate owners. So far in 2023 it has sold data centres, paid down debt and invested in its core portfolio as it maintained liquidity of between $800 million and $900 million.
President and chief executive officer Cecilia Williams, one of the panellists, said Allied doesn’t plan to allocate any incremental capital to acquisitions next year.
āOur focus in 2024 will be to complete development activities currently underway, complete upgrade activities and lease-up vacant space,ā said Williams.
āWeāve repositioned our balance sheet for strength and flexibility, and we are in capital and liquidity preservation mode.ā
āWhen we get into a project, we always make sure that we have the equity available for it,ā said another panellist,Ā FengateĀ managing director and group head of real estate Jaime McKenna.
āSo we’re not in a position where we need to raise capital to actually execute on the transaction.ā
The rising cost of debt, however, has put Fengate in a position where it’s either pausing on making moves or taking longer to make decisions.
Optimizing portfolios and operations
āIn times like this with capital scarcity, people want to ensure that they have the best positioned portfolios that are operating in the most efficient way,ā Magliocco observed.
āMost leaders don’t believe that we can actually wait this out and instead we need to start to rebalance and reposition and optimize portfolios to focus on what lies ahead.
āThat’s going to be critically important to position themselves as they emerge from this period of uncertainty in a much stronger form.ā
Assets that were once considered core may no longer be and some owners are looking to pivot with their asset mixes or look to niches including data centres, student housing and medical offices to generate higher returns.
Panellist andĀ Starlight CapitalĀ CEO and chief investment officer Dennis Mitchell believes most large Canadian real estate developers, managers and owners have great relationships and deep pools of capital.
Thus, he expects real estate will continue to appeal to source capital as long as returns justify it.
Mitchell would like to see more innovation in the Canadian real estate market, including the creation of pure-play data centre and cellular tower real estate investment trusts, as well as a larger focus on student housing.
Magliocco said generative artificial intelligence ā which can generate high-quality text, images and other content based on data received ā āhas the potential to really revolutionize the rules of the game and could have a pretty profound impact on the overall strategy in achieving portfolio and operational optimization.ā
Bigger emphasis on ESG
Environmental, social and governance (ESG) considerations have become critical levers as building owners and investors realize they can help preserve long-term asset values while also creating value through improved operating cash flows and more attractive capital from lenders and investors.
Panellist andĀ Infrastructure OntarioĀ chief ESG officer Toni Rossi said people have to stop thinking about ESG as a cost and consider it an investment.
Institutional real estate investors have traditionally been more focused on ESG than private developers and owners, but the tide appears to be turning.
āWe get pressures from institutional capital, which wants ESG to be at the forefront, so we adapt our products and our policies and our investment criteria to achieve what they’re looking for,ā McKenna said, adding that enables Fengate to apply similar pressure to its private partners.
āOnce you get your house in order, that puts you in a power position with your partners to say āWe’re going to expect more from you.ā ā
The sale of a portfolio of data centers handled by CBRE and Scotiabank and an office disposition arranged by Cushman & Wakefield are among the top third-quarter property sales recognized by CoStar.
As big-ticket items involving sizable investments, commercial property transactions often have a wider impact within the local community. CoStar recognized the largest deals completed during the third quarter in their respective markets.
Here are the Greater Toronto property sales selected as the third-quarter 2023 winners of the CoStar Power Broker Quarterly Deal Awards:
Seller:Ā Allied Properties Real Estate Investment Trust, Toronto, ON
Brokers Involved:Ā Peter Senst of CBRE and Justin Bosa and Peter Zorbas of Scotiabank represented the seller.
Deal Commentary:Ā In one of the largest deals in the third quarter for the market, Allied Properties sold a trio of data centre properties, including a leasehold interest at CBC’s headquarters, to a Japanese telecommunications provider in a CA$1.35 billion deal. The Toronto-based real estate investment trust, hired CBRE Limited and Scotiabank to market the portfolio that included freehold interests inĀ 151 Front St. WestĀ andĀ 905 King St. West, as well as a leasehold interest inĀ 250 Front St. West.
Brokers Involved:Ā Robert Elms and Pat Murphy of Cushman & Wakefield represented the seller.
Deal Commentary:Ā In another top deal from the quarter, IBM sold a pair of office properties to New York-based Veyron & Co. for $191.04 per square foot. The sale-leaseback transaction included the four-storey 8200 Warden Ave. building as well as a second office property in Bromont, Quebec, that has yet to close.
Buyer:Ā Groupe Mach and Sarees Investments, Montreal, QC
Seller:Ā Dorsay Development, Toronto, ON and AIMCo, Edmonton, AB
Brokers Involved:Ā Matt Picken, Bryce Gibson and Tyler Randa of JLL represented the seller.
Deal Commentary:Ā Groupe Mach kicked off the quarter with a blockbuster deal in early July to buy the Atria Business Park in partnership with Sarees Investments. The three office buildings at 2225, 2235 and 2255 Sheppard Ave. E. in North York is considered one of the largest office nodes on the outskirts of downtown Toronto. The purchase expanded Montreal-based Mach’s position in the Toronto market.
Brokers Involved:Ā Jonathan Gorenstein of Lennard Commercial Realty represented the buyer.
Deal Commentary:Ā Newmar Alpa Lumber Group, one of the largest suppliers and manufacturers of construction products distributed across Canada and within the United States, accomplished a rare feat in the third quarter by acquiring an industrial building in Oxford Properties’ Vaughan Industrial Park in an off-market transaction. Oxford rarely parts with properties in the industrial park, according to local brokers. The building atĀ 81 Royal Group CrescentĀ is located in Concord, north of Toronto. The sale was arranged by Lennard Commercial Realty broker Jonathan Gorenstein. The property, which occupies a 10-acre parcel and was built in the late 1990s, is currently tenanted by automotive supplier Martinrea, with five years remaining on its lease. A previous furniture supplier tenant went out of business and vacated the property earlier this year.
Brokers Involved:Ā Peter Senst, Matthew Brown and Kai Tai Li of CBRE represented the seller.
Deal Commentary:Ā Woodbourne, a major investor, operator and developer of apartments, seniorsā housing, student housing, self-storage and other real estate assets, invests primarily in urban areas across Canada on behalf of a broad base of institutional investors, including public and private pension funds, endowments, foundations, and funds of funds, picked up this seven-property industrial portfolio in Vaughan from BentallGreenOak in a third-quarter deal.
Skyline Industrial REITĀ has acquired two newly constructed assets in Quebec and Ontario as it continues to increase its weighting in more modern properties across Canada.
āWe’re being selective as we acquire assets right now,ā president Mike Bonneveld told RENX, ābut I think we’re one of the few groups that’s actively out there looking for assets.ā
Skylineās balance sheet is in a good position, according to Bonneveld, after pruning its portfolio with the disposition of its last office property in February and the sale of other non-core assets over the past few years.
āWe got ahead of the curve and I’d love to say we were really smart and knew what was coming, but there was also luck involved,ā Bonneveld explained.
āIt’s put us in a really good spot where we can be a bit picky and be able to acquire good assets when lots of guys are ‘pens down’.ā
Quebec cold-storage facility leased to Congebec
Skyline acquired the interests of its development partner,Ā Rosefellow, and is now the sole owner of a facility atĀ 3601 Avenue de la GareĀ in Mascouche, Que., an off-island suburb of Montreal.
Construction was completed in late September on the multi-tenant development totalling 321,000 square feet. A 226,000-square-foot cold-storage facility with a 32-foot clear height is being used entirely byĀ Congebec.
Bonneveld said Congebec had approached the trust and other developers several years ago about its desire for a new building in the Montreal area. The site in Mascouche was acquired for that purpose based on the cold- and multi-temperature storage, warehousing and distribution company committing to a 20-year lease for the new development.
Montreal-based Rosefellow owned a small stake in the property and the plan was always for Skyline to acquire it upon completion of the building.
Skyline is in lease negotiations for the siteās remaining dry-storage space. Bonneveld is looking to close a deal for about 60 per cent of it very shortly and two other tenants are interested in the remaining space, so heās hopeful it will be fully leased before the end of the year.
Other Rosefellow partnership developments
Skyline is in partnership with Rosefellow on seven developments in the Montreal area and two in Ottawa. Seven are at various stages of development and Bonneveld said theyāre on or ahead of schedule from both construction and leasing standpoints.
Two Montreal projects are essentially finished and 100 per cent leased.
āWe are working with Rosefellow and our other equity partner in there to buy them out of both of those, and the hope is that those will close in Q1 of ā24,ā Bonneveld said.
Second Woodstock, Ont. acquisition
Skyline also acquired a 148,050-square-foot building with a 28-foot clear height and 16 shipping doors atĀ 353 Griffin WayĀ in Woodstock, Ont. It was completed in October and is fully leased long-term toĀ IPEX.
Bonneveld said the deal was brought to Skyline from a broker late in 2022 when it was in the early construction stages. It was developed by Paris, Ont.-basedĀ 214 Carson Co.Ā and acquired by Skyline for $28.5 million.
Skyline acquired another Woodstock property in a small industrial node just off Hwy. 401 last year and Bonneveld said it has become popular with manufacturers and logistics companies, so he was happy to purchase another asset in the area.
āFor tenants, itās a bit of a rent discount compared to Kitchener-Waterloo and Brantford, but itās a brand new building that’s really well-built,ā he said. āIPEX is a very strong tenant, so getting a long-term lease with annual escalations, from what I think is a really good starting rent in terms of cost per square foot, gives us a really nice entry point.ā
Skyline is doing due diligence on two other potential acquisitions, one of which Bonneveld hopes to close before Christmas and another thatās at an earlier stage.
September dispositions
Skyline sold 12 non-core assets totalling 485,488 square feet across four provinces, in two separate transactions, in September.
Cervus Equipment Corporation was leasing 11 light industrial/showroom spaces totalling 364,954 square feet in Alberta, Saskatchewan and Manitoba when it was acquired byĀ Brandt Tractor Ltd.Ā a year ago. The new owner preferred owning its properties over leasing them and an off-market deal was struck to acquire them from Skyline for $68 million.
Skyline also sold an older 120,534-square-foot cold-storage facility at 7801 Boulevard Henri-Bourassa E. in Montreal.
Congebec had occupied the facility and Bonneveld said āwe had an agreement where we would let them out of their lease if we were able to re-lease to an equal or better tenant and then sell the building off to a third party, which we did.ā
Skyline completed a lease agreement for the entire facility withĀ Confederation FreezersĀ and then sold the property for $22.6 million.
Capital from those sales will be put toward acquisitions and development.
āWe’re done the strategic disposition program and there’s really not much, if anything, that’s targeted for sale,ā Bonneveld said in reference to the sale of non-core assets.
The firm’s current focus is on acquiring warehousing and logistics-centred properties along major highway corridors and transportation routes.
Skyline will, however, consider selling properties if itās approached with an attractive offer.
Skyline now owns 49 properties
Guelph, Ont.-based Skyline is now 84 per cent weighted in warehousing, distribution and logistics-focused assets. The portfolio comprises 49 properties in five provinces with a total of 9,196,171 square feet of industrial space.
Skyline is a privately owned and managed real estate investment trust that launched in 2012. Itās distributed as an alternative investment product throughĀ Skyline Wealth Management Inc.
The REITās properties are managed byĀ Skyline Commercial Management, a commercial real estate property management company housed withinĀ Skyline Group of Companies.
Employers are gradually mandating workers back to their offices, but not without first inducing them with progressive spaces.
Count theĀ Investment Management Corporation of OntarioĀ (IMCO) among a cadre of established corporations in the Greater Toronto Area that have used the pandemic-induced office furloughs of the past few years to reimagine the office experience.
IMCO has consolidated employees from three offices in the GTA into a single location at 16 York St., where itās taken up residence from the 23rd to 25th floors, comprising 66,000 square feet.
That might have seemed superfluous before the pandemic, but thatās hardly the case today.
IMCO is taking the open-concept office to another level. Rather than sequestering its employees at dedicated workstations, the vast, capacious office space is designed to encourage interaction, incubate creativity and, ultimately, cultivate collaboration between otherwise disparate departments.
Julie Phillips, president and partner atĀ Flat Iron Building Group Inc. ā which constructed IMCOās new office space ā told RENX workers have been apprehensive about returning to staid, stuffy offices after several years of working comfortably from home. Sheās unsurprised.
Thatās why it is no coincidence IMCO choose the 33-storey, 800,000 square-foot 16 York to house its new offices, because itās both LEED Platinum and WELL Institute-certified. Not only is that important for both a companyās ESG score and reducing its overhead, itās a recruiting tool.
And while innovative corporate cultures and office designs are inducements, large companies like IMCO are sweetening the pot by taking advantage of vacancies in prime locations like 16 York.
āItās super accessible to Union Station for people to commute in,ā Phillips said.
āWith these new buildings, from an air-quality perspective and from an amenities perspective ā whether that be parking or bike facilities or nearby restaurants ā thereās a flight to quality right now where people are looking to new buildings, especially with vacancy rates being where they are.ā
IMCO office decision provides dual benefits
Employers like IMCO have also used the turbulence caused by COVID-19 to make fiscally sound decisions. In consolidating three offices into a single headquarters, IMCO has cut unnecessary costs, Phillips said.
āIn addition, it is the way people can flow between departments and share a single lunch room, multiple collaborative spaces and meeting rooms, one reception, one quiet area, rather than separate amenities in three separate places,ā she added.
A light-filled collaboration area in IMCO’s new Toronto headquarters at 16 York St. (Courtesy IMCO)
Moreover, unlike earlier in the pandemic when workers enjoyed leverage afforded by a hiring boom fuelled by low interest rates, labour conditions are no longer as tight, turning the tables back in favour of employers.
However, high interest rates havenāt just curbed new job creation. They have also ā as seen in Canadaās tech sector that shed 160,000 jobs in 2022 and 100,000 more during the first six weeks of 2023 ā forced some companies to downsize.
āA lot of companies were told staff who didnāt want to go into the office would quit and would be difficult to replace, so that was the motivation to let people keep working from home. That was the case 12 to 24 months ago,ā Ron Jasinski, senior vice-president ofĀ Colliersā GTA office division, told RENX.
And because, Jasinski added, companies still fervently believe employees are more productive working on-site than remotely, theyāre taking advantage of the economic headwinds. Heading into 2024, it isnāt as easy to jump ship and join another company.
āNow companies are laying people off and hiring less,ā Jasinski continued.Ā āThe pendulum is slowly swinging back the other way.ā
“The Hive”
IMCO requires its employees to be at the office at least three days a week ā but itās betting staff will like what they see when they arrive.
The firm hiredĀ SDI DesignĀ to design the office and conceptualize its culture. Themed āThe Hive,ā IMCOās 16 York head office is inspired by the egalitarian nature of beehives, spurning surfeit executive suites in favour of these types of workspaces.
āEven from CEO down, not having private offices in some environments, it got accentuated even more during COVID,ā Phillips said.
āWhy come to an office if youāre sitting with your head down at a desk, crunching numbers? You should be coming to an office because you need to work with a team, because you need to collaborate, because you need to engage.
“Itās not as effective to work in an office if all youāre doing is working by yourself.ā
Downtown Toronto saw an upswing in leasing activity in the third quarter despite economic headwinds, Jones Lang LaSalle (JLL) has reported.
JLLās Office Insight report for Q3 found the total vacancy rate in Downtown Toronto hit a peak of 15 per cent in the quarter. This was primarily due to significant amounts of Class C vacant space added to both the downtown east and west markets.
Despite an annual 3.8 per cent increase, Toronto Downtown saw a second quarterly dip in average direct asking net rents, sitting at $37.67 as of Q3. The region saw two new completions in Q3 2023, totalling 304,876 square feet, with a 16.5 per cent average pre-leased rate.
JLL found that office occupiers continue to weigh their capital expenditure on real estate amidst overall economic uncertainty. The finance, insurance and real estate (FIRE) sector continues to lead in demand for premium office spaces. Notable examples include Northleaf Capital and Pacific Life, who leased up to 52,000 square feet and 23,000 square feet at Scotia Plaza, respectively; both are relocations.
On the renewal front, Desjardins Securities extended and expanded at 25 York St., leasing up to 57,000 square feet. ICICI bank is relocating from the suburbs to downtown for approximately 40,000 square feet in a newly improved space on Bay Street.
Downtown Toronto sublease availability plateaued in Q3, sitting at 4.4 million square feet. Notably, Downtown Class A sublease availability decreased by 2.9 per cent quarter-over-quarter, with downtown south registering a notably substantial decline by 24.2 per cent. This decline in sublease availability is credited to not only to strong demand for quality sublet space in newer buildings, but also the increasing flexibility in disposition and termination options offered by landlords that has resulted in more spaces being vacated.
With more than five million square feet of office space delivered since the onset of COVID-19, the construction pipeline continues to thin out, JLL stated. In response to the diminished demand for new office space, a few mixed-use projects have reconfigured their usage mix while still in the proposal or early construction phase.
Two noteworthy projects that broke ground in Q3 are 266 King St. W. and 481 University Ave. Both projects are retaining their office components and adding high-rise residential condominiums above.
A pilot project is winding down in Burlington, Ont. that accelerates the permitting process for industrial and commercial buildings.
By using AI technology, the platform digitizes the rules in Burlingtonās zoning bylaws relating to such aforementioned projects.
City of Burlington executive director of digital services and chief information officer Chad MacDonald explains the pilot is structured into four strategic phases, each designed to build upon the previous to develop a robust AI-driven assessment tool for building applications.
The four phases include:
Phase 1: An industrial submission review to analyze various design submissions against the City of Burlingtonās āEmployment Zoneā zoning bylaws. This phase aims to grasp the complexity of the codes and gather data to develop an assessment template for the AI algorithm.
Phase 2: Assessment template design. This is to create a standardized assessment template tailored to the City of Burlingtonās zoning bylaws, particularly for industrial designs. This will form the groundwork for the subsequent automation phase, shaping the AIās evaluation criteria within the eCheck engine.
Phase 3: Automation feasibility with the eCheck engine. This phase determines the feasibility of automating the assessment process. This will outline the automation techniques suitable for encoding into the eCheck system, focusing on key zoning features like setbacks, heights and parking ratios.
Phase 4: Generating sample eCheck reports to test the AIās performance by processing three āreal worldā industrial design submissions to the City of Burlington. This will showcase the practical application of phases one through three and the AIās capability to generate reports that align with Burlingtonās zoning bylaws.
āItās crucial to emphasize that our approach is iterative. We are committed to refining the algorithm continuously. This involves a rigorous process of evaluating the output and making iterative enhancements to the engine,ā said MacDonald.
Burlington is the first Canadian city to use the technology specifically for development on areas that have been set aside in land-use planning for commercial or industrial development.
āThis proof-of-concept represents a pivotal step in harnessing the power of AI to not only streamline complex processes but also foster a more collaborative and efficient interface between the city and its constituents. By integrating cutting-edge technology into urban planning, weāre preparing for a future where digital tools help our city act faster, work smarter and welcome everyone. Weāre not only optimizing the building application process but also setting a new standard for how technology can be used to serve our community more effectively,ā said MacDonald.
The AI-powered technologyās ability to review designs quickly and efficiently provides value to the city, customers and staff, including:
Saved time, by reducing the number of manual exchanges between applicants and city staff;
allowing applicants to have immediate feedback on proposals and allowing for modifications prior to submission;
faster approvals and turnaround time on issuing building permits;
shortened design time;
higher quality of design submissions;
financial savings on the cost of multiple design revisions; and
enhanced transparency about the City of Burlingtonās development review process.
The pilot began in late July and will conclude by the end of 2023. The objective is to provide essential data on the value such a tool may provide for Burlington in accomplishing stated organizational goals related to housing.
The platform can also be used to check design compliance on all forms of development. While this option is not currently part of the pilot, applicants can pick a specific site, upload their design to the platform and immediately see a 3D visualization which allows users to assess whether their design meets the rules. To date, reaction from users has been encouraging.
āWhile the proof-of-concept is still in progress and comprehensive feedback is forthcoming, the indications we have received so far are quite promising. As the project has progressed, the eCheck engine has demonstrated a high degree of precision in interpreting our bylaws and generating reports,ā said MacDonald.
According to city officials, next steps after the pilot concludes may include further pilots or a larger-scale rollout.
In a Canadian commercial real estate market facing bearish conditions across most asset classes, any advantage that can improve asset performance becomes increasingly essential to withstand the economic challenges.
The CRE industry is typically awash in data, but the extent to which that data is leveraged by asset owners has not always kept pace, especially when it comes to occupier data.
Toronto-based firmĀ simplydbsĀ has developed a series of data products built for real estate owners, operators and developers to make them more responsive to the needs of occupiers ā and therefore more successful. The suite of tools launched commercially about a year ago.
Mainly, simplydbs provides what its founders call ācircular surveysā through its product Shape Your Space, which gathers data on preferences and satisfaction from tenants and residents via custom surveys that are regular and adaptive.
āThere’s actually nothing like this currently as a solution for users of space,ā said simplydbs CEO Sarah Segal, who co-founded the company with COO Katherine Radziszewski. āTraditional surveys are done in a linear fashion.ā
Segal said that means typical user surveys in the CRE space are one-directional and close-ended, and not conducted frequently so āthere’s no way to form that relationship with the people in the buildings.ā
Better data collection and analytics
Canadaās commercial real estate firms lag global peers in adopting, and adapting, data science into their investment strategies, according toĀ Altus Group’sĀ The State of Data Science in Commercial Real Estate InvestingĀ report.
The report stated 93 per cent of Canadian firms use analytics, but only 35 per cent employed data science to properly interpret and leverage that data.
“simplydbs uses both feedback programs and ESG solutions as much as a data science methodology to power decisions for the industry as a whole,” Segal said.
“By combining math and statistics, advanced analytics with industry expertise, our products are able to provide actionable insights for our clients.ā
Segal said these occupier-centric insights are used to guide strategic planning and decision-making for all areas of an organization, including leasing, property management, asset management and investor relations.
Surveys on the Shape Your Space platform are updated or changed every 30 days and provide opportunity for granular or personal feedback. Segal said the team filters the data to provide reports and visualizations.
“The industry now has a tool to know what people are thinking every day with our circular and relationship-driven survey and feedback platform, Shape Your Space,ā Segal said, adding that in challenging economic times, information is more important than ever to validate and inform decisions.
Survey data can unlock interesting revelations
simplydbs has performed surveys, for example, that revealed people feel less safe in their parking area than they do in other areas of the building.
“We asked what would make you feel more safe in your parking area? It turns out that (itās) not on-site attendants, but actually video cameras. So now we’re able to go back to our clients and say, ‘What is the signage like? Do you have cameras? If you have them, make sure people know you have cameras.’ ā
As with most survey data, the larger the response pool, the better the results.
“Our national multifamily survey that we just finished (included) some 20,000 responses,” Segal said. āWith 20,000 responses we achieved a 95-99% confidence level, meaning if we ran the survey again, the likelihood we would receive the same results is 95-99 per cent.ā
One of the main takeaways from that national survey was that 46 per cent of renters said they were renters out of preference. (Sixteen per cent of those respondents said renting was a better fit for their budget, meaning 30 per cent preferred renting for other reasons).
simplydbs is working with clients including Canadian Apartment Properties REIT, Cushman & Wakefield, Fiera Real Estate and Starlight. The company is also an official partner with GRESB Real Estate.
Segal said residential, office and retail owners have been driving the most demand for the products.
Other simplydbs products
In addition to Shape Your Space, the company has other products including Activate This Space, which gathers demand-side data ahead of creative placemaking and activations, capital expenditure programs, new developments and/or redevelopments; and SDBS Engagement Index, which measures creative activations, placemaking and events.
simplydbs then provides an overall activation score and a broader building/portfolio score for benchmarking.
Most of the data the firm provides is national- or broad-based-level data, Segal said. It’s not about asking a single building’s tenants if they want food trucks on Thursdays.
“It’s about (surveying) all users of that asset class; all office employees; all retail shoppers; all retail employees.ā
The surveys function by “layering on to existing communications,” Segal said. That could be a digital sign or a QR code, an app, or any type of regular building communications channels.
“We understand where the responses are coming from, (but we also donāt) burden property management teams with a lot of extra work.”
Segal said the voices of building users or residents should be used to inform ownership and management.
āDemand data informs ROI assumptions from validating capital and technological decisions, benchmarking satisfaction and services to predictive analytics and more,ā Segal said.
āUnderstanding what people in our spaces want and need is invaluable.ā
