Toronto Office Investment Forecast
Toronto Metro Area, 2018 Outlook
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Toronto Ascending to New Heights, Strengthening Its Position as a World-Class City

Growing space demand from tech companies. Toronto stands at an inflection point as the thriving tech industry expands and the downtown office market begins a major transforma-tion. Sidewalk Labs, an Alphabet subsidiary, along with Waterfront Toronto are spearheading a redesign of Toronto’s eastern waterfront into a technology hub. Google’s Canadian Headquarters are relocating to the new district, leading the revival of this largely industrialized area adjacent to downtown. Toronto’s diverse and well-educated population provides tech companies that are expanding their GTA footprint with a deep pool of talented labour. As demand for top-tier office space near transit, restaurants and other amenities grows, a wave of new properties are opening as more than 4 million square feet are underway. The majority of new office space opening this year will once again be in the downtown submarket, followed by the Toronto West area.

Investor sentiment holds strong, though tightening capitalization rates may form a headwind. Encouraged by economic growth and robust leasing, investors remain optimistic, fueling activity in both the downtown and the suburbs. A broad mix of tech-relat-ed companies in the Downtown West area, along with a large inventory of older assets ripe for renovation, draw interest from private parties and institutional buyers looking for upside. As plans move forward on the redevelopment of Toronto’s eastern waterfront, acquisition of properties surrounding the new district will surge as more investors look to capitalize on future growth in the area. Demand for top-tier assets will persist this year as investors seek out long-term moves, though exceptionally tight cap rates could hinder trade volume. First-year yields in the downtown area average in the low-4 percent band while suburban properties fall in the upper-5 to mid-6 percent range.