The Pitfalls Of Verbal Commercial Real Estate Negotiations

There are limited occasions where it can be an acceptable strategy, when it has become necessary to finish a deal. But often it is not a viable solution; often it can result in causing hard feelings between parties to the negotiation and, at worst, blowing up the deal entirely.

Typically I’d categorize a verbal offer as more of a fishing expedition that is far less likely than a written contract to lead to a transaction that closes.

When it can work, why to avoid it

There are occasions when an in-person meeting between parties can result in finalizing a complex negotiation.

If most of the terms of an offer have been hammered out on paper, and there is clear motivation between both parties to complete a deal, I will sometimes recommend an in-person meeting.

It can work if the conversation is solution-focused and properly facilitated.

I want some compatibility between the parties that come to the table and do my best to stay clear of a meeting where that compatibility does not exist.

I had a situation a couple of years ago where a landlord insisted on being present during a pitch to a potential corporate tenant. A couple of well-intentioned statements that individual made during the meeting eliminated any hopes of securing this corporation as a tenant.

Risk of a misunderstanding

A quick review of a standard offer to lease reveals about 15 details that are likely to be overlooked in a verbal negotiation. It’s easy to start a business relationship on the wrong foot by forgetting to talk about essential elements of a deal.

Both parties can walk away feeling like they have an understanding only to find out when the paper gets drafted that too many details were left out of the discussion that materially impact the transaction.

When negotiating a lease with third-party management in place, I’ll ask the property manager to review the offer before proceeding.

There can be issues such as the number of electrified or non-electrified parking stalls available to contract for staff, exclusive use clauses that may have been previously negotiated by other tenants in the development, or a first right of refusal may have been granted to adjacent tenants.

The list of essential considerations is long.

And, finally, have I been granted the authority to negotiate if the client I’m representing isn’t present?

Where there are only one or two elements to discuss, obtaining that authority from my client before a discussion is easy.

If, however, there are many elements to be determined, I simply can’t engage in the negotiation unless I have a written power of attorney.

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The Greater Toronto Area Created The Most Tech Employment Growth On The Continent In The Past Five Years: Report

Canada’s three largest cities all improved their rankings in CBRE’s Scoring Tech Talent 2022 report of North American cities, including Toronto which is now No. 3 on the list.

The Greater Toronto Area created the most tech employment growth on the continent in the past five years, the report states. The commercial real estate firm’s report said Toronto added 88,900 jobs in the tech sector between 2016 and 2021 – more than any of the 50 North American markets surveyed.

It moved up one spot in the rankings from a year ago.

In the overall ranking, the San Francisco Bay area was first followed by Seattle and then Toronto. Vancouver was the only other Canadian market in the top 10 as it jumped three spots in the ranking to take No. 8, adding 44,460 jobs in that same five-year period, or 63 per cent growth, the highest percentage of all 50 ranked markets.

Ottawa, with the highest concentration of tech talent on the continent – 11.6 per cent of the city’s total employment force – took No. 13 in the tech talent ranking, while Montreal moved up a spot to No. 15. Waterloo Region (No. 24), Calgary (No. 28), Edmonton (No. 35) and Quebec City (No. 39) also made repeat appearances in the Top 50.

“Canadian markets continue to be among North America’s top-performing destinations for tech talent, with 11 cities well-positioned in the latest CBRE rankings. It’s a testament to the impressive momentum this sector has been gathering over the past five years,” said Paul Morassutti, CBRE’s vice-chairman.

Tech growth not just a Toronto story

“Though the industry faces some very real, short-term cyclical challenges, our longer-term thesis remains unchanged: the technology sector will continue to drive outsized growth as our knowledge- based economy expands.

“Canada’s digital economy is now bigger than the forestry industry, the mining industry, the natural gas industry.

“This expansion of the knowledge-based economy is not unique to just Toronto. It really has taken hold in many cities across the country. It’s one of the really nice success stories that this is not simply a Toronto story.

“It’s very much a Canada story and when you look at the different markets there are different areas of specialty in each market.”

For example, Montreal and Quebec City are well-known for gaming technology. Toronto and Edmonton are well-known for companies dealing with Artificial Intelligence.

Software development is a specialty in Vancouver, while oceans-related technology is emerging as an important sector in Halifax.

“There’s this nice balance of tech expertise across the country and even in places like Calgary, where traditionally so much of their economy has been focused on the energy sector, increasingly we’re beginning to see that Calgary’s made really great strides as well,” said Morassutti.

“Since 2016, about 750,000 square feet of tech office space has been leased in Calgary and 70 per cent of that has happened since 2020.

“So they are making pretty good strides in helping to attract these companies.”

Schools, universities producing tech talent

In Toronto, the total number of tech occupations is 289,700 with a five-year growth rate of 44.3 per cent. The average wage of $88,254 has seen 7.4 per cent growth over five years.

Morassutti said the tech ecosystem in Toronto has been developing over the last decade “of really being almost best in class.”

“When I talk about the tech ecosystem I mean the combination of really good quality post-secondary schools or universities that produce a lot of tech talent . . . the accelerators like MaRS (Discovery District). There’s a number of tech accelerators in the city which almost act as breeding grounds for small startups,” he explained.

“And then you have the interplay of large tech behemoths who are already in the city and smaller tech startups that the genesis of those companies is often talent coming from those large tech companies.

“You have a very evolved venture capital tech ecosystem in Toronto. . . . You put all of those things together and Toronto has sort of slowly and steadily moved into this position of being a true tech powerhouse.”

In the CBRE report, tech talent is defined as 20 key tech professions – such as software engineers and systems and data managers – across all industries.

The Scoring Tech Talent report ranks top tech markets in the U.S. and Canada and outlines the industry’s job-growth trends amid economic shifts and increased remote hiring.

Scoring Tech Talent report analyzes 13 factors

The report analyzes 13 measures of their ability to attract and develop tech talent, including tech graduation rates, tech job concentration, tech labour pool size, and labour and real estate costs.

CBRE also ranks the Next-25 emerging tech markets on a narrower set of criteria. Halifax (No. 9), London (No. 10) and Winnipeg (No. 12) made repeat appearances on this list, with London seeing 99 per cent growth, or a doubling of its total tech employment, between 2016 and 2021.

Morassutti said the commercial real estate firm began conducting deep research into the tech sector because it identified many years ago the connection between the growth of the sector and the use of office space.

“When you look at office-using jobs for example, over the last decade the amount of tech-related office-using jobs is more than double than all of the other office-using job growth combined,” he said. “A lot of that growth has been in the Googles and Facebooks of the world.

“A lot of it has been in smaller tech companies, but then a lot of it has been in banks and insurance companies and real estate companies where so much of the hiring has really been tech people.

“Every company needs this talent and this has been what’s driving the office market and demand for office space, and given some of the challenges that the office market has we want to understand the tech industry as best we can because despite the short-term challenges that the industry has – it’s going to be a choppy year for tech.

“Long-term we think this expansion of the knowledge-based economy and the digital economy is still in its early stages and technology will continue to drive demand for office space, or at least the primary driver of demand for office space.”

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Capital Developments Proposes 75-Storey Tower at Yonge and Gerrard

Zoning By-law and Site Plan Amendment applications have been submitted to the City of Toronto by Capital Developments, which is proposing to construct a 75-storey condominium and retail tower at 399-405 Yonge Street, located on the northeast corner with Gerrard Street in the city’s Downtown.

The proposed tower, designed by Teeple Architects, would join the existing 78-storey Aura at College Park at the intersection’s northwest corner, and the under-construction 85-storey Concord Sky at the southeast corner of the two streets. At the southwest corner, 372 Yonge is still awaiting approval, proposed to stand 74-storeys tall. More similarly tall buildings are proposed on neighbouring sites.

The building’s architecture mostly frames pairs of punched windows in two-storey segments, with certain vertical piers emphasizing the height staggered through the rise of the building, while there are also three areas of interruption in an otherwise gridded exterior; at the base, at about 50 storeys up, and finally against the crown. Various corners at these three locations would have sections of exterior wall deviating from the grid as a visual tease.

Currently, the site is occupied by several three-storey commercial properties: those at 401 and 405A Yonge Street are listed under Part IV of the Heritage Act, although not designated. All of the buildings would be demolished to make way for the proposed tower. The retained heritage facade of 401-405A Yonge Street would be maintained and integrated into the podium building facade along Yonge. See in the image below at left, the facade would be integrated where the white space is pictured two images below.

To the immediate east of the site is Covenant House, which takes youth in off the streets, and run by a non-profit organization which, according to submitted documents, will continue to be consulted with as part of the ongoing planning process. To the north, separated from 399 Yonge by a single two-storey structure at 407 Yonge, is 415 Yonge, another recent proposal which includes the replacement of the existing 19 storey office development with a 69 storey mixed-use tower. 

Proposed at 75-storeys, the mixed-use 399 Yonge would contain a total of 828 units, along with retail and service commercial space at-grade, within a four-storey base building. The development would consist of of 53,602m² of residential gross floor area (GFA) which would result in a Floor Space Index (FSI) of 51.6 on the lot.

The proposed unit mix is 73 junior one-bedroom units (9%), 426 one-bedroom units (51%), 243 two-bedroom units (29%), and 86 three-bedroom units (11%).

Amenity space would be found in a number of location throughout the building, particularly on floors 2, 5, 49, and 75. In most cases, indoor amenity space on those levels would be contiguous with terraces. Generally, balconies are not planned on the building, but a few suites would have terraces related to the sections where the exterior deviates from the grid.

The site is within walking distance of College and Dundas subway stations. The site is served by bike routes with dedicated lanes along College Street, Gerrard Street, and Sherbourne Street.

Bicycle parking spaces for long-term use is located below grade and on the mezzanine level, and short-term parking spaces are located at street level. A total of 844 bicycle parking spaces are provided for both residential and non-residential uses. The proposed driveway access to the loading and underground bicycle parking area would be located along the eastern boundary of the site, immediately west of and adjacent to The Covenant House at 20 Gerrard Street. The driveway would solely be for bicycles and service vehicles as there are no resident motor vehicle parking spaces proposed within the building. 

We will continue to follow progress on the development, but in the meantime, you can learn more about it from our Database file, linked below. If you’d like, you can join in on the conversation in the associated Project Forum thread, or leave a comment in the space provided on this page.

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Commercial real estate investment in Canada is experiencing a major resurgence in confidence: Altus Group report

Commercial real estate investment in Canada is experiencing a major resurgence in confidence, with an Altus Group report chronicling $23.8 billion in Q1 transaction activity.

The real estate analytics and research company said that figure, transacted across all major asset classes in Canada during Q1 2022, is a 52 per cent hike from Q1 2021. Deal volume was up across all major asset classes with the exception of hotel transactions.

Just over 3,250 transactions were completed in the first quarter of 2022, a 25 per cent increase compared with the same period of 2021.

“The Canadian commercial real estate industry demonstrated resiliency throughout 2021, investment activity kicked off 2022 with an upswing in momentum,” the report states. “All asset classes reported an increase in activity (with the exception of hotels) accompanied by a return in investor confidence, the market was also subjected to heightened investor scrutiny.

“This closer analysis can be attributed to rising interest rates, volatility catalyzed by the pandemic, and the impacts of the current geopolitical climate.

“The most active asset classes in the first quarter of 2022 involved transactions of industrial and office assets as well as both ICI and residential land. A combination of excitement and tentativeness characterized 2022 with a note of cautious optimism and anticipation of growth in Canada’s commercial real estate space.”

Confidence in Canada’s CRE market

Raymond Wong, vice-president of data operations for Altus’ data solutions division, said overall there is a fair degree of positive confidence in investment in the CRE market.

“We can see that with the first-quarter results and granted, also realize that a lot of the first-quarter activity was based on overflow from 2021,” said Wong. “Then we got hit with the Ukraine war, we got hit with higher interest rates.

“So now the numbers have changed to a certain extent. Construction costs are now higher. The cost to borrow is a little bit higher and real estate is still performing quite well on the industrial and multifamily side, but I think now we’re looking at more scrutinization of those numbers.”

He said there are a number of potential questions in play.

“What are the expectations on returns, as well what are the expectations between the purchasers and vendors?” Wong explained. “Has that changed? And, whether or not that may cause a bit of a pause in the marketplace as people get caught up with the new numbers, as well as where we’re going with inflation and employment activity and the question of a possible recession.”

Andrew Petrozzi, director, commercial research, Western Canada, for Altus Group, said the market has seen and continues to see, a strong demand for land, particularly in Vancouver, and an increasing demand for land in Alberta.

“Industrial remains a very strong asset class, both in the West, in both Alberta and B.C., particularly you are seeing increased demand for industrial in Calgary and industrial in Vancouver remains red hot as well. In Edmonton you’re actually starting to see an increase in demand, particularly around the multifamily side,” he said.

“You’re seeing a recovery of sorts in Alberta. Part of that is fuelled by probably some of the conflict obviously in Eastern Europe. Higher energy prices do translate generally to a more positive outlook for Alberta and when people have a positive outlook for Alberta that increases confidence and we have seen that confidence reflected in the early part of the year and certainly in late 2021 and into 2022 as well.”

Office sector investment doubles

According to the Altus data, the office sector was quite active with just over $3 billion in sales activity – almost double the investment volume registered in Q1 2021 – securing its place as the asset class with the strongest growth year-over-year in dollars invested.

With 245 transactions conducted in Q1 2022 accompanied by people beginning to go back into the office, investment in the office sector is resurgent.

This resumption in activity was also a reflection of negotiations that were paused in the second half of 2021 now coming to fruition, according to the report.

“The industrial sector recorded the highest investment volume in terms of both dollars and the number of transactions. In the first quarter of 2022, the industrial asset class saw 735 transactions valued at slightly less than $5.8 billion, a 66 per cent increase when compared with Q1 2021,” said the report.

“The land sector remained very active in the first quarter of 2022 registering 643 ICI land sales and 553 residential land deals, a 26 per cent and 30 per cent increase in the number of transactions, respectively, from the same period in 2021.

“Land transactions represented more than $8.9 billion in investment volume, an increase of more than 110 per cent compared with the same period last year, which totalled 36 per cent of all transactions across all of the asset classes to the end of the first quarter of 2022.”

“Investment in the retail and apartment sectors also continued to demonstrate growth, reporting a 24 per cent and five per cent increase in the transactions completed, respectively, year-over-year.

“The national investment in retail properties grew 55 per cent and was valued at $2.6 billion in the first quarter of 2022; more than $3.1 billion – an eight per cent increase compared with a year earlier – was invested in the Canadian apartment sector.”

Nationwide interest in land

Wong said the nationwide interest in land is positive.

“That shows that there is overall confidence going forward and a lot of the owners and developers are banking on future growth and the need for housing. Industrial has always been the sort of silent (asset class) but every year it produces good returns.

“With the pandemic it just accelerated that demand and to a certain extent Canada is still under-warehoused, especially compared to the U.S.,” said Wong.

“So you have a very good increase in rents especially for the last seven years – 10 to 20 per cent depending on the building. We have very strong returns and you always had an active market both from the user standpoint as well as from the investment standpoint.

“Over the last couple of years, we’ve had a stronger increase in demand from investors, driving up the price, and I think that’s caused some of the users to step back a little bit. There’s been very strong investment activity from institutions as well as private investors coming into the industrial side.”

Wong added that the office sector has come back. It has been a bit of a grey area recently with more people working remotely on a regular basis, or the adoption by some companies of hybrid work models.

“The good news is that for office there’s still a certain level of confidence with the number of people that have stepped up. . . . Yes, residential and industrial is getting a lot of that attention, but office is not dead yet,” he said.

“I think we can still see an evolution and by the level of investment activity, there are buyers for the office assets.”

Petrozzi said land is severely constrained in B.C. both for industrial and residential real estate.

“Land has always demanded a bit of a greater premium in British Columbia as a result of our geographical and political boundary constraints,” he said. “As a result, that supply has continued to tighten which is another modifying factor adding on to this increased demand. . . .

“That’s one of the reasons you’re seeing a kind of rush for land – try to get it while you can.”

Toronto, Vancouver, Montreal top markets

According to Altus Group’s Investment Trends Survey for the first quarter of 2022, the most preferred markets by investors were Toronto and Vancouver, followed closely by Montreal. All three markets reported an upswing in their momentum ratio, which calculates the percentage of buyers over the percentage of sellers.

Food-anchored retail strips, suburban multiple-unit residential and industrial land were the Top-3 most preferred products by investors.

This is consistent with similar trends noted in 2020 and 2021 that can be attributed to the essential nature of the assets as well as the flexibility these property types offer with potential for redevelopment in a time of constantly evolving consumer needs.

“National overall capitalization rates continued to compress across all major asset classes in the first quarter of 2022 with the exception of industrial assets. This may be driven by the rise in interest rates and the related impact on consumer spending, thereby reducing demand for manufacturing/distribution facilities,” the report states.

“However, the impact of rising interest rates is expected to be minimal in the first half of 2022 as transactions were negotiated prior to the change in interest rates, but will become more apparent in the second half of the year. Industrial assets will continue to remain a favourite with investors as supply lags absorption.”

“As investment in all asset classes (except hotels) registered strong performance in the first quarter of 2022, the Canadian commercial real estate industry appears poised for continued growth through the year with some caveats.

“Interest rate hikes, combined with the ongoing impact of a volatile geopolitical environment and the lingering aftermath of pandemic containment measures, will become more apparent as the year progresses and may constrain select investment activity.”

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It’s Now Tougher to Find Office Space in the Suburbs Than Downtown: Report

For the first time in history — and in a clear sign the in-person workspace is here to stay — vacancies for suburban commercial office space continue to be tighter than their downtown counterparts.

This past quarter marks the second consecutive period where vacancy remained lower in markets outside of city cores at 90 basis points, reports CBRE’s Q2 2022 Office Figures report, compared to the national downtown vacancy rate of 16.9%. Seven out of 10 Canadian markets reported declining vacancy rates, officially minting a trend as the sector recovers post-pandemic.

“Canadian office markets are still trying to find their footing in the new world of hybrid work. Suburban office strength shows how habits and business are in flux. While there is good news, economic instability is adding to the challenges facing businesses as they attempt to map out their office requirements for the future,” says CBRE Canada Vice Chairman Paul Morassutti. “To the doomsayers out there, it is increasingly clear that office real estate still has a core purpose and value to businesses, or else we would see a far worse dynamic playing itself out by now.”

However, some downtown markets retained their ranking as office hotspots; conditions cooled in the City of Toronto with a vacancy rate of 11.9% (mainly due to the influx of 612,000 sq. ft of new inventory this year), while Vancouver experienced extraordinarily tight conditions, with the downtown rate squeeze by 50 bps to 7.2%. In all, half of all Canadian markets experienced decreased vacancy including Halifax (-80 bps), Montreal (-20 bps), Ottawa (-20 bps), and Waterloo Region (-10 bps).

Another sign that the commercial office space sector is stabilizing is that the number of sublets — which can indicate companies changing their office use or rightsizing — also fell in the second quarter. In fact, the total amount of sublet space available is the lowest since the fourth quarter of 2020, at 14.3M sq. ft. According to CBRE, this is “an indication of growing confidence among businesses using office space.”

Construction levels have also been on the rise in the early part of the year to meet demand, with over 15.1M sq. ft under development across the nation. New projects are launching with gusto in the suburbs of Vancouver and Calgary, not to menton nearly half that inventory amount also underway in the downtown Toronto core.

Class A buildings (those with premium amenities in the most central locations) were in highest demand, outperforming lower-quality and older-aged space, as employers value these features despite the drawback of a downtown commute.

Industrial Office Space Supply Hits Record Low

Meanwhile, CBRE reports, the stock of industrial space remains remarkably scarce; the national availability rate had a record — though steady — low of 1.6% last quarter, even though 6.1M sq. ft of new supply came to market. In fact, national construction levels hit a new high, with 43.9M sq. ft of new supply; however, that represents just 2.3% of total available inventory. Large bay facilities are in particularly high demand due to their dearth of supply with more than three-quarters of the existing development pipeline attempting to alleviate the crunch with projects 200,000 sq. ft or larger.

With the exception of Calgary and Edmonton, all Canadian industrial markets now have availability rates of 2% or lower.

The challenges of finding space hasn’t dampened demand, however. Leasing activity was robust, with 7.2M sq. ft of positive net absorption. Toronto saw the largest amount of leasing activity, with 2.6M sq. ft accounted for, followed by Calgary at 2M, and Edmonton at 1.1 — a testament to the strong demand and available space in the Alberta markets.

According to the report, new leases were predominantly driven by third-party logistics, accounting for 4.4M sq. ft in the first half of the year, after a strong second half of 2021, with 5.2M sq. ft.

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Fengate acquires Toronto Adelaide St. high-rise dev. site

A Toronto high-rise development property at the intersection of Adelaide Street West and Charlotte Street has been acquired by Fengate Asset Management following a receivership sale.

Fengate announced the acquisition of 46 Charlotte St., 16 Oxley St., and 355 Adelaide St. W. on Tuesday morning. The 13,725-square-foot property in the Entertainment District currently contains a heritage-listed six-storey building and the most recent development proposal for the site includes retaining portions of the structure.

Zoning and site plan applications are “in progress” according to Fengate.

The most recent proposal for the site is to redevelop it with a 48-storey tower which would include about 400 multiresidential units, as well as commercial and retail space.

In an email exchange with RENX, Fengate managing director and group head of real estate Jamie McKenna said the firm is reviewing the proposal.

“We are reviewing opportunities to enhance the existing proposal to maximize the positive impact of the development to the surrounding community,” she wrote.

The current project would include a podium incorporating some aspects of the existing 28,000-square-foot structure and comprise about 328,000 square feet of floor space. The existing building links back to the expansion of Toronto’s garment industry in the 1920s and 1930s, which drove the revitalization of the area, according to information from Fengate.

“On behalf of our investors, Fengate is pleased to acquire this centrally located, historic site in downtown Toronto. The project will offer future residents contemporary living spaces and modern amenities right in the heart of the Entertainment District,” McKenna said in the announcement.

“This acquisition is aligned with Fengate’s highly focused investment strategy to develop large urban residential sites that support the growth of communities in transit-oriented nodes.”

No financial details about the transaction were released.

The Adelaide/Charlotte/Oxley location

Fengate is managing the investment and development on behalf of its investors, including the LiUNA Pension Fund of Central and Eastern Canada.

“The site on Charlotte and Adelaide is a unique opportunity to simultaneously pay homage to Toronto’s entrepreneurial history and address the future housing needs of our growing city,” said Andrew Konev, Fengate’s senior vice-president, development, in the release.

“The proposed development will introduce new clients to businesses in the area and will provide housing options to a talent pool looking for convenient access to the world-class employment opportunities in the nearby Financial District and the expanding tech node of the area.”

He told RENX no timeline is available for the development.

The property has strong walk, transit and bike scores, which will be enhanced by the construction of the future Queen and Spadina station on the Ontario Line rapid transit line a short walk away from the proposed development.

Currently, the Osgoode and St. Andrew subway stations are both less than 800 metres from the site. There is also access to the dining, retail, entertainment, fitness and lifestyle amenities along nearby King and Queen Streets.

This acquisition expands Fengate’s downtown Toronto development portfolio, which also includes Natasha The Residences and a proposed development for the Rail Deck District.

The Charlotte/Adelaide site was one of eight potential development locations across the Greater Toronto Area and Southern Ontario, formerly owned by Go-To Developments Holdings, which had been listed for sale after being placed into receivership in December 2021.

This property was listed by Colliers, while the other seven sites scattered across the GTA, St. Catharines, Hamilton and Niagara Falls were listed through CBRE’s Land Services Group.

KSV Restructuring is the court-appointed receiver for the proceedings.

About Fengate Asset Management

Fengate Asset Management is an alternative investment manager focused on real estate, infrastructure and private equity strategies.

With offices in Canada and the U.S., Fengate is one of the most active real asset investors and developers in North America. Fengate Real Estate, a division of Fengate Asset Management, has been developing and managing real estate assets since 1974.

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Downtown Toronto Foot Traffic Has Surged By 62% Since March

Toronto is back in business. 

As a loud and clear sign of the pandemic recovery times, downtown Toronto’s foot traffic has surged by 62% since March. 

Global commercial real estate advisor Avison Young has released its latest Toronto office market report, which reveals a re-emergence of life and activity to Toronto’s streets. Avison Young’s Vitality Index tracks foot traffic using cell phone pings in 23 downtown cores across North America, including six cities in Canada.

According to the report, Toronto recorded its highest volume of downtown foot traffic since March 2020 during the week of June 13, 2022 (volume for the week ending July 17, 2022 is only slightly lower). Across North America, average downtown foot traffic volume is at the highest level for the week of ending July 17, 2022, since March 2020.

According to the report, the Greater Toronto Area (GTA) saw positive absorption for the third straight quarter –following six negative quarters during the pandemic — as occupied area increased by 443,000 square feet.  Downtown Toronto’s positive absorption reflected 1.5 million square feet, the highest positive absorption since before the pandemic.

In the downtown core, an 8.3% downtown office vacancy ticked up from 8.0% due to new product entering the market. This figure is up from 2.1% in the first quarter of 2020. In the pricey city, some companies see opportunities to grow or move to better-located or higher-quality premises, while others see options to downsize or sublet.

“While some companies continue to consider downsizing or subletting a portion of their office space, others are seeing opportunities to grow or move to better-located or higher-quality premises, and new occupiers entering the Toronto market for the first time continue to make headlines,” reads the report. 

Availability of space in the GTA office market held steady in the second quarter of 2022, after the rapid rate of increase seen during the pandemic had begun to level off in recent quarters, according to the report. “The market remains active as a greater range of available options offers tenants the chance to explore alternatives that best suit their evolving needs, amid the ongoing changes in workplace strategy sparked by the pandemic,” it reads.

The GTA office market continues to be “characterized by sound fundamentals,” with availability remaining flat at 15.5% quarter-over-quarter, while vacancy climbed 80 basis points (bps) to 10%. For the third straight quarter, absorption was in positive territory (following six negative quarters during the pandemic) as occupied area increased by 443,000 square feet (sf) across the GTA. Gains in the downtown market were offset by losses in midtown and the suburbs, according to Avison Young.

Total available sublet space was essentially flat for the second consecutive quarter in the GTA, inching up 1% to 6.3 million square feet (msf). Nearly 8.2 msf of new office space was under construction across the GTA at the end of the first quarter (66% preleased / equal to 4% of inventory). 

As with the GTA overall, the availability rate remained flat quarter-over-quarter in the downtown Toronto market at 14.1%, representing an increase of 130 bps year-over-year. Vacancy continued to edge upward, rising 30 bps to 8.3% during the second quarter. This is despite positive absorption of more than 1.5 msf, by far the market’s best result since before the pandemic.

The increase in occupied area was localized in downtown south, as tenants began to take occupancy of new buildings completed in recent quarters, with King and Dufferin the only other downtown node to post positive absorption during the second quarter. 

The midtown market posted rising availability (up 30 bps to 14.3%) and vacancy (up 210 bps to 10.1%) quarter-over-quarter. The jump in vacancy resulted primarily from significant negative absorption in the Bloor node, where occupancy decreased by more than 340,000 sf during the quarter — the losses mostly occurring in class B buildings. 

Overall availability in the Toronto north and east markets rose 50 bps during the second quarter to 16.5%, while vacancy climbed 80 bps to 10.2%. Occupancy gains in the east were offset by losses in the north, says Alison Young — particularly the north Yonge node, where negative absorption can be partially attributed to tenants taking advantage of the increased range of available options in the downtown market. 

No new supply deliveries have added to the north and east inventory so far in 2022; however, two new construction projects are under way in the east market totalling nearly 166,000 sf (82% pre-leased), while in the north, a total of nearly 647,000 sf is under construction across four projects (59% pre-leased). 

The return to life as we knew it pre-pandemic is not only reflected in things like rising foot traffic and the return of employees to the office, but also in the return of Toronto’s maddening traffic (not that we’re complaining; we’ll take that over lockdowns any day).

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Proposal For 1315 Finch Reconfigured And Resubmitted To The City

A resubmission has been made to the City of Toronto by CTN Developments for the property located at 1315 Finch Avenue West, just east of Keele Street. The developer previously submitted rezoning and subdivision approval applications in February of 2020 to construct a mixed-use development that would bring four towers to the site, which is currently occupied by a five-storey medical building.

The rezoning and subdivision applications were deemed completed in 2020, although there is a new Site Plan Approval application that has been submitted, which completely changes plans for the AAA Architects-designed development. Between the previous submission and now, CTN has worked with City Staff to develop a revised site layout to address concerns identified as part of the initial review.

As a result of the efforts, the new application submitted this May offers a new east-west oriented public right-of-way extending from Tangiers Road along the east side of the site, new public parkland, mixed-use towers connected by a shared podium oriented along Finch, a new office building located at the intersection of the future east-west road and Tangiers Road, and an apartment building internal to the property that would be adjacent to the future east-west road and the parkland.

The number of buildings in the proposal changes from four to three, although the largest of the buildings includes three towers rising from a shared podium. Heights move upwards marginally from 13 and 14 storeys to 14 and 15. The new total gross floor area of the proposal is 66,702m², consisting of approximately 10,248m² of office space, and 3,630m² of retail space, with a resulting FSI of 4.03 on the lot. The new office building would replace what is currently within the existing building and expand upon it.

The total residential unit count is reduced slightly from 818 to 803 units, with the breakdown now proposed as 45 studios (6%), 557 one-bedrooms (69%), 121 two-bedrooms (15%), and 80 three-bedrooms (10%). The proposed three-bedroom units include 24 townhouse style units that would front onto an internal POPS (Privately Owned Publicly accessible Space) and the proposed parkland.

The mews/POPS area would provide direct connections between the new public right of way, Tangiers Road, the proposed public park, and the Finch West station (combined Line 1 subway and Line 6 LRT) and plaza at the corner of Keele Street and Finch Avenue West. Unit entrances and building lobbies would front onto the outdoor space, with opportunities for public art, plantings, and public seating areas. 

A shared underground structure would provide a total of 553 parking spaces over three levels, which has been reduced from the perviously proposed 821 spaces of the former application. Bicycle parking of 888 spaces is to be provided, including 775 long-term spaces, and 113 short term spaces.

Just steps from rapid transit, the new development has been reconfigured to offer connectivity within and through the property to the adjacent subway and LRT station and plaza.

The proposed phasing has also been modified. Phase 1 would include construction of the new right-of-way, public parkland, and proposed office building; Phase 2 would bring the proposed three-tower, mixed-use building along Finch; and finally, Phase 3 would see the proposed apartment building constructed.

UrbanToronto will continue to follow updates for this development, but in the meantime, you can learn more from our Database file for the project, linked below. If you’d like, you can join in on the conversation in the associated Project Forum thread, or leave a comment in the space provided on this page.

UrbanToronto’s new data research service, UrbanToronto Pro, offers comprehensive information on construction projects in the Greater Toronto Area—from proposal right through to completion stages. In addition, our subscription newsletter, New Development Insider, drops in your mailbox daily to help you track projects through the planning process.

Source Real Estate News Exchange. Click here to read a full story

Concert’s CREC Fund Buys Another Mississauga Office Bldg.

Concert’s CREC Commercial Fund LP has acquired a second boutique-type office property in a Greater Toronto Area west submarket in Mississauga.

The fund now owns the 99,828-square-foot, four-storey 6750 Century Ave. property in Meadowvale. The class-A building was constructed in 2009 and was acquired from Artis REIT, which has been undergoing a major strategic and portfolio reorganization during the past year or so.

“This is an exciting acquisition as it represents an excellent opportunity for the fund to deepen its holdings in the Meadowvale submarket with a quality office property while supporting Concert’s continued growth and expansion,” said David Podmore, Concert’s chairman, president and chief executive officer, in Tuesday’s announcement.

Concert paid $30 million for the property.

The 6750 Century Ave. property

6750 Century Ave. is a LEED- and Energy Star-certified office building on approximately 3.46 acres of land adjacent to a linear park system. It has 336 surface parking spaces, 20 of which are covered.

Concert says it is continuing to see strong demand for “high-quality, well-located suburban offices, where tenants benefit from decentralized office footprints that promote better work-life balance and offer shorter commute times for both staff and visitors, thereby helping to attract the best talent.”

The building currently has three vacancies comprising a total of about 20,000 square feet, which had been listed for lease by Artis. In an exchange of emails, Concert’s director of corporate communications John Corry said efforts will continue to onboard new tenants.

“We think there is an opportunity to launch a strong marketing and leasing program and appeal to a wide variety of tenants who can benefit from the already built-out and demised space,” he wrote.

The building is in an area which is already home to several multi-national companies and head offices including McKesson, Novo Nordisk, RBC, BMO and Intact, along with other financial, technology and pharmaceutical companies.

The tenant list at 6750 Century includes a diverse set of national and global companies including Whirlpool Canada’s head offices. It is already demised to accommodate a wide variety of tenants with unit sizes ranging from under 5,000 square feet to about 25,000 square feet.

Concert and Mississauga

It has easy connectivity to the 400 series highways and is located 18 kilometres from Toronto Pearson International Airport. Transit access is provided through the MiWay bus system and the Meadowvale GO Station, both within one kilometre.

“We are pleased to acquire another exceptional office building that enhances the ongoing investment and growth of our fund which is supported by our dedicated pension and institutional fund investors,” says Andrew Tong, managing director of the CREC Commercial Fund LP.

The property also adds to Concert’s Mississauga holdings. The firm also owns 2476 Argentia Rd., a 100,000-square-foot class-A building very close to the Century Avenue property, as well as several other GTA West office and industrial properties.

With its modern construction and and sustainability certifications, Concert’s initial focus will be to transition management of the building and integrate it into the fund’s holdings.

“Our current focus is to ensure that there is a smooth transition operationally,” Corry wrote. “Our goal is to provide an exceptionally high level of service to our existing tenants.  

“Longer-term, this asset will be viewed as a hold for our Commercial Fund generating income for our pension and institutional investors.”

About Concert and CREC Commercial Fund LP

Concert has been involved in developing, acquiring and managing Canadian real estate since 1989. With over $8 billion in assets, Concert’s portfolio is backed and owned by over 200,000 Canadians, represented by union and management pension plans. 

The firm is involved with rental apartments, condominiums, seniors’ active aging communities, industrial and commercial properties, and public infrastructure projects.

The fully subscribed CREC Commercial Fund LP is a diversified Canadian portfolio. With ongoing plans to expand, this open-ended, limited partnership fund invests in, and actively manages, industrial and office real estate in Canada. 

The portfolio is managed by Concert Realty Services Ltd. and serves as Concert’s exclusive commercial platform.

The fund is supported by multiple Canadian pension funds and institutional investors.

The portfolio has an asset value in excess of $2.4 billion and over 11.6 million square feet of leasable area.

Source Real Estate News Exchange. Click here to read a full story

Dealpath Opens T.O. Office To Expand Canadian Client Base

Dealpath, a cloud-based real estate investment management platform, has added a Toronto office to its existing dual headquarters in New York City and San Francisco.

“We are building out this command centre that provides centralized data that’s globally accessible and high-performing,” Dealpath co-founder and chief executive officer Mike Sroka told RENX. “We provide flexible workflows that enable teams to work effectively from wherever they might be working and provide the enterprise data security that these leading institutions require.

“We believe that investment decision glory is when these investment managers can see the performance of their portfolio in real time, overlaid with every opportunity that they’re seeing in the market and the comps of every asset and deal they’ve ever looked at or worked on.”

The Toronto office is led by strategic account director Stephanie Gaty, who joined Dealpath in May after nearly three years as a senior sales executive at CoStar Group. The McGill Universityand New York University graduate previously had roles at Altus Group and AP Capital.

Dealpath is in the midst of hiring people for a number of different roles in the Toronto office, located at 240 Richmond St. W.

Toronto a “key market” for Dealpath

The location will assist Dealpath in expanding its Canadian client base, tap into Toronto’s hub of skilled talent and provide access to core institutional capital invested in real assets.

“We’ve always viewed Toronto as one of our key markets,” said Sroka. “We view it as a global office not just for Canada, but for our broader business.”

The firm’s Canadian clients include Oxford Properties, First Capital, Fiera Real Estate, Manulife Investment Management, Healthcare of Ontario Pension Plan, CentreCourt Developments, Hopewell Development, Crestpoint Real Estate Investments and Le Groupe Maurice.

Dealpath was founded in March 2014 and provides a platform for clients to operate at scale with speed and precision to deliver optimal risk-adjusted returns.

Commercial real estate uses decentralized data, which can be timely and costly to access from different sources, to compile and glean insights. Dealpath helps real estate private equity firms, public and private real estate investment trusts, banks, life insurance companies and specialty lenders accomplish this so they can make informed acquisition, development and financing decisions.

Dealpath offers its services under annual and multi-year contracts comprised of per-user subscription fees and a one-time implementation fee.

The company says it has supported more than $10 trillion in transactions globally, with international customers including Blackstone, Nuveen, AEW, Principal Real Estate, MetLife and Bridge Investment Group.

Dealpath has been financed by a combination of venture capital firms, including 8VC and Greensoil PropTech Ventures, as well as strategic real estate operators, including Blackstone and JLL.

The company isn’t just expanding in Canada.

“We’re really excited to be on a growth trajectory and trying to build out our teams and programs to support a broader business,” said Sroka. “We have been experiencing strong growth and see an enormous opportunity in front of us.”

Source Real Estate News Exchange. Click here to read a full story