Office Sales Dry Up Across The Greater Toronto Area
Office Sales Dry Up Across The Greater Toronto Area
The office market across the Greater Toronto Area has seen a significant drop in transaction volumes compared to pre-pandemic years. While the drop in office utilization is likely a factor, tighter capital markets and growing uncertainty surrounding the stability of the Canadian economy are also contributing.
Comparing the last three years to the three years leading into the COVID-19 pandemic, quarterly office sales volume in the GTA has dropped by just under 30%. This overall decline has occurred to some degree across most of the region’s office submarkets.
One notable exception is the Downtown Central office submarket, defined by CoStar as the area just North of the Financial Core and stretching from Queens Street to Dundas and between Church Street to John. Even though the difference in the dollar amount for office sales between the two periods is relatively low, marginally higher than $14 million, the proportional increase is material.
Average quarterly sales volumes increased 15-fold in the last three years compared to the equivalent period leading into COVID-19. Notably, this surge in sales volume is attributable to a single large deal in December last year, the $165.25 million sale of 2 Queen St. East. CPP Investments and AIMCo sold their 75% interest in the 477,000-square-foot office building to Brookfield Asset Management, Halmont Properties Corp. and Toronto Metropolitan University.
Conversely, the Downtown North office submarket, located just above the Downtown Central submarket, experienced the most significant decline in office sales, with a quarterly drop of roughly $110 million. Once again, this drop can be attributed to a small number of large deals that occurred before the pandemic. A total of 21 office sale transactions totaling over $1.8 billion sold in the Downtown North submarket three years before COVID, with five of the deals accounting for over $1.6 billion of this sales volume.
Transaction volumes in the office sector will likely remain low compared to historical norms as Toronto grapples with more restrictive capital markets and lower office utilization.
The current downside risks are compounded by economic uncertainty caused by a potential trade war and tariffs. There are no office transactions under contract for more than $20 million across the entire GTA as of this writing.
Source CoStar. Click here for the full story.
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