Making it Work
Q3 2021 Market Report
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The Greater Toronto Hamilton Area (GTHA) saw an increase in tour activity and excitement in the industry as Ontario’s lockdown limitations were removed in Q3 2021. While the official return to office was set for September 2021, some corporations have delayed their plans back to January 2022 due to concerns about the Delta variant developments.
Industrial Market Outlook
The GTHA industrial market had another solid quarter in Q3 2021, with the availability rate dropping 30 basis points to a new low of 0.7 percent. While absorption was lower this quarter than in Q1 and Q2, year-to-date totals for 2021 have already surpassed those of the preceding five years.
Since Q3 2016, Q3 2021 represented the 20th consecutive quarter of positive absorption. As space becomes more scarce, there has been an increase in demand for high-quality space, with renters demanding particular requirements that older buildings struggle to achieve. Large bay space is being leased 2-3 years out for buildings under construction and those in the planning stages, so those looking for space larger than 200,000 square feet will need to be proactive and thorough in their search.
This means that new developments will be entirely pre-leased when they hit the market, leaving potential tenants with restricted options and a scarcity of space in the GTHA in the future years.
Office Market Outlook
Negative absorption was prevalent across the GTHA, resulting in a net loss of -615,052 square feet, while vacancy and availability both increased by 30 basis points (bps) to 8.5 percent and 20 bps to 10.2 percent, respectively. This quarter, three new supply projects were completed, bringing the total amount of Class A inventory in the Downtown North, Downtown West, and Burlington submarkets to 179,866 square feet.
This quarter, the number of new sublease spaces continued to decline, with some tenants opting to remove their listings from the market. Multiple offers are typically received for high-quality sublease options, indicating the present flight to quality. This trend was most noticeable in the Downtown Toronto sector, which saw a dip from 33.6 percent in Q2 to 27.1 percent in Q3. This quarter, a higher amount of available space comes from Class A and AAA buildings, which helps to explain rising weighted average rental rates.
Read more in our Q3 2021 Market Report!
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