Thursday, September 29, 2011
Condo boom eating up office space
Toronto is reaching a tipping point — a shortage of development-ready land for new office towers at the same time thousands of new financial services jobs are projected for downtown and more companies are looking to return to the city core from the suburbs, says Dobson.
The former commercial brokerage executive and co-author of a report for the Canadian Urban Institute warns that Toronto has allowed construction of so many condo towers on what were meant to be office building sites, there is only enough development-ready land for about 4 million square feet of new office space left in the downtown.
Even the old converted “brick-and-beam” buildings to the west and east of the core, now home to some 18 million square feet of commercial development, are close to being full, says Dobson.
“The area within 500 metres of the subway is prime get yourself to work and back again space and when it gets eaten up by a lot of residential development, you have to wonder where will the new offices go?,” says Dobson.
He points to buildings like the 70-storey Trump Tower and 65-storey Shangri-La Hotel, both hotel and condo developments on land once slated for offices. They are among twelve new highrise condos, with 5,707 new units, under construction in the downtown core right now.
One-third of all jobs in the GTA are office jobs, notes the report, The New Geography of Office Location and the Consequences of Business as Usual in the GTA.
Thirty years ago, 63 per cent of office space was located in the downtown financial district or directly along subway lines. But so many businesses have flocked to the suburbs, as of 2010, 54 per cent of office space was located in the road-dependent 905 regions.
That dramatic shift, thanks to plentiful land and cheap taxes, not only clogged major roads, it turned the core into a one-horse town dominated by the financial services sector.
“The 416 region has become the bedroom community for the 905 regions,” says Dobson.
There is some evidence that’s starting to shift as environmentally conscious companies such as Coke and Telus consolidate suburban operations in the core to ease long commutes and be close to where employees live.
But governments need to do more to ease commercial taxes, integrate transit to growth areas and review land use policies for any developable land within a five-minute walk of subways with a focus on office rather than more condo development.
Commercial realtors say they are managing to find sufficient office space for companies that are looking. Colliers International says, in fact, a number of financial district tenants are moving into new offices on the Railways Lands, which is freeing up hundreds of thousands of feet of prime space in the financial district.
Realtor Cushman & Wakefield notes that almost 4 million square feet of office space has come on stream downtown since 2009 and 5.2 million more is planned. It estimates that’s enough, given current demand, for about nine more years of growth.