Developers Not Building Any More Office Buildings in Toronto?
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And this article is from the Globe and Mail and the headline is, In Toronto’s Land War, Condo Builders are Better Armed. So, it’s talking about the rising price of land and how there’s this sort of war between condo builders, residential builders, and office builders and what makes the most sense for developers to do with a piece of land in the city. Basically, it’s concluding that residential uses of land will generate more profit for developers at the moment than commercial.
What’s interesting in this article is that, it says this, the Toronto office market has gotten incredibly tight in recent years according to Altice Group’s 2018 State of the Market report, Toronto’s overall vacancy rate fell in 2017 for the first time in six years at the same time that two million more square feet of office space was completed and added to the market so, when we’re adding a record amount of new office space to the market, we’re seeing the actual vacancy rate go down for the first time in six years.
The general consensus here, in terms of what’s happened in the commercial market, is commercial market is very hot, the office market is very hot. The point of this article is that residential, because the condo prices have gone up so much, that it makes more sense for most land to be developed as residential, not commercial, but, my point here with this video is just to let you know that the pendulum is going to swing back and forth as it always does, between these so, vacancy very, very low in offices. Office rents go up, therefore, the value of that land from a commercial office standpoint increases and so more developers will build offices instead of condos and, you know, the cycle is gonna go back and forth.
Right now, the cycle is pointing towards residential condo growth because condo prices have gone up so much but, we can certainly see that, at some point the residential growth is gonna slow down, as we say over and over again, here, we’re not going to be sitting on 15, 20% price appreciation in condos forever. This is not normal. We’re gonna slow down. On the other hand, the office market vacancies at all time low, rents are gonna go up and that’s gonna drive more demand towards the office side. But, again, the great news is that office vacancy very low, job market is very, very strong in Toronto. We’re adding, we’ve added millions of square feet of new office space and it’s all full. The jobs are here and that’s underpinning the entire condo market, of course. And we want to continue to see that as condo investors. It’s all good news here.
Hope you enjoyed this article.