Toronto Real Estate Board President Mark McLean announced that TREB Commercial Network Members leased almost 6.1 million square feet of combined industrial, commercial/retail and office space in the fourth quarter of 2015. This result represented a 19.6 per cent year-over-year increase compared to the fourth quarter of 2014. More than three-quarters of all leased space was accounted for by the industrial market segment, followed by 12 per cent for the office segment and 10 per cent for the commercial/retail segment.
Year-over-year changes in average lease rates, for properties leased on a per square foot net basis with pricing disclosed, were mixed in Q4 2015. The average industrial lease rate was $6.09 per square foot net – up substantially compared to $5.22 in Q4 2014. While increased demand likely played a role, the key reason for the strong year-over-year growth in the average industrial lease rate was a number of deals completed for large spaces signed at above-average lease rates. The average commercial/retail lease rate was down compared to Q4 2014. The average office lease rate was up compared to the same period last year. “It was a tumultuous time in Canada, from an economic perspective, in 2015. Nationally, we entered into and then climbed back out of a modest recession. The volatility in economic growth obviously had its foundation in declining oil prices, which hit the economies of western provinces particularly hard. However, in other parts of the country, like Ontario and particularly the GTA, economic conditions were not so severe.
The unemployment rate trended lower for much of 2015, suggesting that many firms in the GTA were taking on employees. This suggests that some companies may be anticipating stronger growth ahead, perhaps as a result of the lower valued Canadian dollar vis-à-vis the US,” said Mr. McLean. “Looking forward, it is quite possible that we could see an uptick in commercial leasing and sale activity in 2016, as the economy in the GTA and Ontario more broadly outperforms many other Canadian provinces. With this said, it is important to point out that after a good GDP growth result for the third quarter of 2015, a poor October result suggests that the rate of economic growth may have moderated in the fourth quarter. The continuation of economic volatility could slow some firms’ real estate investment decisions,” continued Mr. McLean.
Total industrial, commercial/retail and office property sales amounted to 235 in Q4 2015 – down by approximately 27 per cent compared to 322 sales in Q4 2014. The number of sales were down for all three market segments. Year-over-year changes in average sale prices, on a per square foot basis for transactions with pricing disclosed, were mixed. The average industrial selling price, at $87.37 per square foot, was down by approximately 15 per cent compared to Q4 2014.
The average commercial/retail selling price was down substantially, but this was largely due to a greater share of larger properties sold in the last three months of 2015 compared to the same period in 2014. Larger properties tend to sell for less on a per square foot basis. The average office price was down by 7.1 per cent year over year.