Downtown Toronto

Q2 2018

Office Insight

Can Downtown get any tighter? Yes, it can and

yes, it will.
• Looking for space downtown? It’s going to be a tight squeeze. Vacancy Fundamentals Forecast
dropped 100 basis points this quarter to reach 3.4 percent, a new record YTD net absorption 1,096,906 s.f. ▲
low for the market! Under construction 4,482,966 s.f. ▲
• The market absorbed over 725,000 s.f. with no signs of demand slowing. Total vacancy 3.4% ▼
• With the announcement of 160 Front St. W., committed construction in
Downtown Toronto totals over 9 million s.f., nearly 20.0 percent of Class Average asking rent (gross) $56.15 p.s.f. ▲
A inventory downtown! Concessions Falling ▼
Toronto’s economy continues to grow at a brisk pace with over 63,000 jobs
Supply and demand (s.f.) Net absorption
added to the market in Q2. Office-using industries grew by over 2.3 percent. Deliveries
Leading contributors to this growth include professional, scientific, and 3,000,000
technical services as well as finance, insurance, and real estate. Both
industries grew by 6.4 percent for a combined total of 46,300 jobs added. 2,000,000

Downtown positive absorption and leasing activity continue to accelerate

1,000,000
past expectations as well. The market posted over 725,000 s.f. of positive net
absorption this quarter, driving the already-tight vacancy rate down to a 0
record low of 3.4 percent! And it’s only going to get tighter from here as Q2 2015 2016 2017 Q2 2018
saw a notably higher-than-average amount of leasing activity. Tech incubator
OneEleven expanded by 49,000 s.f. at 325 Front St. W. while Google leased a
total of 47,000 s.f. on the last two available floors at 100 Adelaide St. W., the Total vacancy
newest office tower downtown. And that’s not all.
6.9%
Two more tenants will be moving downtown from the suburbs after 5.6%
4.6%
completing the largest deals of Q2. Tim Hortons will relocate their Oakville HQ 3.4%
to nearly 55,000 s.f. of podium space at 130 King St. W. in 2019. Ontario
Teachers Pension Plan will anchor Cadillac Fairview’s 160 Front St. W. leasing
240,000 s.f. on 9 floors. OTPP will be moving from their current North Yonge
HQ when the 1.2-million-square-foot office tower is completed in Fall 2022. 2015 2016 2017 Q2 2018

Outlook
With the announcement of 160 Front St. W. and The Well reported to be in the Average asking net rents ($/s.f.) Class A
final stages of anchor negotiations, we currently track over 9 million s.f. of Class B
committed construction, most of which will arrive in 2021/2022. That’s the $40.00
largest area under construction in almost three decades. It’s clear that the $30.00
market needs the supply but the question shifts to how tight the market
becomes in the lead-up to 2021. Is a 0.0 percent vacancy so unfeasible? At the $20.00

current momentum of demand, we’re 12 months or less from a 0.0 percent $10.00
vacancy rate. It’s a distinct possibility that’s getting closer and closer to reality.
$0.00
For more information, contact: Julian Lo | julian.lo@am.jll.com 2015 2016 2017 Q2 2018

© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
 Toronto West
Q2 2018

Office Insight

Toronto West remains a tenants market as major

tenants continue to right size
• Toronto West vacancy edged up 40 basis points this quarter, reversing a Fundamentals Forecast
downward trend since 2015 YTD net absorption 106,445 s.f. ▲
• Almost 300,000 square feet of new supply was completed this quarter Under construction 637,976 s.f. ▶
• Despite high vacancy, average gross rental rate rose a modest 1.3 Total vacancy 16.1% ▶
percent year over year
Average asking rent (gross) $30.06 p.s.f. ▶
A strong Toronto area economy and a Downtown vacancy rate at only 3.4 Concessions Stable ▶
percent has so far failed to create a significant spillover of activity to the
Toronto West market leaving vacancy rates elevated. A major cause for this Supply and demand (s.f.) Net absorption
persistently high vacancy is that many of the largest tenants in the region have 1,500,000
Deliveries
been rightsizing out of inefficient, underused and aging office space. This
1,000,000
quarter, General Electric, signed a 75,000 square foot deal at 1919 Minnesota
Court. They will be reducing their footprint by over 160,000 square feet as they 500,000
move out of their older, underused 242,000 square foot campus at 2300 0
Meadowvale Boulevard and into a near new, more efficient building. This
quarter RSA also completed their move out of over 200,000 square feet at 2225 -500,000
2014 2015 2016 2017 YTD
Erin Mills Parkway into the brand new 2-8 Proligis Boulevard, reducing their
2018
footprint by about 50,000 square feet in the process. The Sheridan Park area is
now 41.2 percent vacant due to RSA’s move and SNC Lavalin’s recent right
size into 2251 and 2285 Speakman Drive which caused a 136,000 square foot Total vacancy
reduction in their footprint. In addition to these right sizes, Microsoft’s recent 17.2%
15.7% 15.6% 16.1%
135,000 square foot deal at 81 Bay Street in downtown Toronto, makes the 13.6%
future of their current suburban office location uncertain.

There has, however, been moderate leasing activity this quarter. In addition to
GE, Campbells took over 50,000 square feet at 2845 Matheson Boulevard East.
They are new to the office market as they will be moving out of their current 2014 2015 2016 2017 YTD 2018
Mimico industrial facility. Soti also continued to expand in the Heartland area,
taking the rest of the Revera sublease at 55 Standish Drive and Weight
Watchers took 22,000 square feet at the under construction 1415 Joshuas Average asking net rents ($/s.f.) Class A
Class B
Creek Drive.
$20.00
Outlook
Vacancy in the Toronto West market is expected to remain stable in the
coming quarters. While 300,000 square feet of deliveries pulled vacancy
$15.00
upwards this quarter, a slower overall construction pipeline should help
prevent continued upswings in vacancy. Rental rates are also expected to be
stable as persistently high vacancy will hamper rental rate increases. $10.00
For more information, contact: Chad Piche | chad.piche@am.jll.com 2014 2015 2016 2017 YTD 2018

© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
 Toronto North &
Q2 2018 East
Office Insight

Northeast office market sees a burst of activity in the

second quarter
Fundamentals Forecast
• Vacancy jumped 80 basis points this quarter due to a few large moves
and reductions this quarter YTD net absorption -161,555 s.f. ▶
• Leasing volume of major leases, over 20,000 square feet, increased three Under construction 336,820 s.f. ▶
fold over Q1 Total vacancy 11.2% ▶
• Average gross rental rates have increased 2.0 percent over Q2 2017 Average asking rent (gross) $32.03 p.s.f. ▲
It was a busy quarter in the Northeast Toronto market. Leasing volume for Concessions Stable ▶
major leases was up threefold over the first quarter of 2018 and the average
quarterly volume in 2017. North Yonge saw the bulk of this activity with OLG Supply and demand (s.f.) Net absorption
signing a renewal expansion for 144,000 square feet. Other new deals include Deliveries
1,000,000
Celestica for 57,000 square feet, Smith + Anderson for 56,000 square feet,
Eckler for 50,000 square feet, Duca Credit Union for 30,000 square feet and 500,000
Equifax who took an additional floor at 5700 Yonge Street. This leasing will
help shore up the rising vacancy in the North Yonge corridor and keep that 0
node in balanced market territory. Additionally, Parkway Place, in the
Consumers Road node also saw notable activity with Nordia and North York -500,000
2014 2015 2016 2017 Q1 2018
General signing new deals for over 40,000 square feet while Shoppers Drug
Mart completed a renewal. In addition to leasing, the property owner also
changed hands as Agellan RIET sold the largely leased up complex to a
foreign investor, summing up an active quarter at the complex. Total vacancy
11.1% 11.2%
11.0%
Vacancy did spike by 80 basis points in the overall Suburban Northeast 10.8%
market this quarter. However, this is due to only a few key moves. Sony 10.3%
completed their right size out of 140,000 square feet at 115 Gordon Baker for
40,000 square feet at the Atria complex, Harlequin (HarperCollins) vacated
110,000 sf at 225 Duncan Mill to consolidate downtown and IBM brought
170,000 square feet of their space at 3600 Steeles Avenue East to the market. 2014 2015 2016 2017 Q2 2018
Still, with robust leasing activity in the region this is likely a one time spike
than a longer term trend.
Average asking net rents ($/s.f.) Class A
Class B
Outlook
$20.00
Vacancy is expected to remain near 11.0 percent in the coming quarters. While
tenants like SAP and Capitol One will be reducing their presence in the region,
expanding tenants such as OLG and Equifax along with new tenants like $15.00
Nordia should keep vacancy stable. With a relatively balanced market, rents
are expected to continue to increase near the rate of inflation.
$10.00
For more information, contact: Chad Piche | chad.piche@am.jll.com 2014 2015 2016 2017 Q2 2018

© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
 Toronto
Q2 2018

Office Statistics

Total net YTD total net YTD total net Average direct Average Total YTD total Under
Inventory Direct Total
Class absorption absorption absorption asking net rent additional completions completions construction
(s.f.) vacancy (%) vacancy (%)
(s.f.) (s.f.) (% of stock) ($ p.s.f.) rent ($ p.s.f.) (s.f.) (s.f.) (s.f.)
Downtown East Totals 5,686,795 -8,438 38,381 0.7% 2.0% 3.2% $26.16 $21.34 0 0 0
Downtown North Totals 12,597,926 98,915 103,305 0.8% 1.0% 1.7% $22.56 $20.50 0 0 0
Downtown South Totals 6,755,699 127,322 137,829 2.0% 0.3% 0.7% $30.45 $23.06 0 0 3,739,371
Downtown West Totals 15,700,431 116,835 159,242 1.0% 2.4% 2.7% $26.45 $18.19 0 0 743,595
Financial Core Totals 33,892,103 390,880 658,149 1.9% 4.4% 4.9% $31.27 $28.90 0 0 0
Downtown Totals 74,632,954 725,514 1,096,906 1.5% 2.8% 3.4% $29.73 $26.42 0 0 4,482,966
Bloor Totals 8,736,693 -165,225 -60,435 -0.7% 3.7% 4.6% $25.51 $21.70 0 0 95,000
Eglinton Totals 4,627,870 51,787 94,129 2.0% 3.6% 4.7% $16.40 $17.32 0 0 0
St.Clair Totals 2,297,610 4,082 -7,561 -0.3% 2.6% 3.2% $24.48 $20.64 0 0 0
Midtown Totals 15,662,173 -109,356 26,133 0.2% 3.5% 4.4% $23.30 $20.57 0 0 95,000
East Totals 30,679,224 -398,831 -392,094 -1.3% 11.9% 12.4% $14.71 $15.34 0 0 0
North Totals 15,051,658 47,918 230,539 1.5% 8.5% 8.6% $18.77 $18.96 0 0 336,820
West Totals 42,193,062 123,104 106,445 0.3% 14.9% 16.1% $16.38 $13.69 298,479 373,235 637,976
Suburbs Totals 87,923,944 -227,809 -55,110 -0.1% 12.8% 13.5% $16.17 $14.84 298,479 373,235 974,796
Greater Toronto Area Totals 178,219,071 388,349 1,067,929 0.6% 7.8% 8.5% $19.42 $17.60 298,479 373,235 5,552,762

Downtown East A 1,463,799 -17,464 -16,528 -1.1% 3.0% 6.9% $28.66 $23.21 0 0 0
Downtown North A 6,264,169 -21,964 -32,001 -0.5% 0.7% 1.6% $20.83 $23.17 0 0 0
Downtown South A 4,942,608 76,855 121,906 2.5% 0.0% 0.5% $33.71 $25.67 0 0 3,739,371
Downtown West A 6,421,555 -7,292 37,828 0.6% 0.3% 0.6% $29.41 $24.19 0 0 647,844
Financial Core A 26,431,462 292,986 731,633 2.8% 4.2% 4.9% $32.19 $29.66 0 0 0
Downtown A 45,523,593 323,121 842,838 1.9% 2.7% 3.4% $31.63 $29.06 0 0 4,387,215
Bloor A 3,398,928 -150,267 -158,643 -4.7% 5.2% 7.2% $26.29 $22.49 0 0 95,000
Eglinton A 1,651,736 5,179 -21,218 -1.3% 1.7% 3.8% $18.60 $19.79 0 0 0
St.Clair A 819,413 -3,837 -12,757 -1.6% 4.5% 5.1% $29.79 $19.98 0 0 0
Midtown A 5,870,077 -148,925 -192,618 -3.3% 4.1% 5.9% $25.94 $21.93 0 0 95,000
East A 17,157,772 -280,323 -321,672 -1.9% 11.5% 12.0% $16.40 $16.11 0 0 0
North A 9,225,586 15,557 204,236 2.2% 9.6% 9.6% $19.68 $19.57 0 0 336,820
West A 26,168,407 14,986 -26,449 -0.1% 12.7% 14.3% $17.89 $14.33 210,033 284,789 637,976
Suburbs A 52,551,765 -249,780 -143,885 -0.3% 11.8% 12.7% $17.69 $15.72 210,033 284,789 974,796
Greater Toronto Area A 103,945,435 -75,584 506,335 0.5% 7.4% 8.3% $21.54 $19.33 210,033 284,789 5,457,011

Downtown East B 1,809,605 5,320 27,899 1.5% 1.9% 2.4% $24.16 $19.04 0 0 0
Downtown North B 5,128,456 88,325 106,112 2.1% 1.3% 1.8% $24.95 $20.25 0 0 0
Downtown South B 1,763,091 50,467 15,923 0.9% 1.2% 1.2% $27.18 $20.44 0 0 0
Downtown West B 2,614,305 27,256 9,714 0.4% 5.0% 5.7% $22.95 $20.97 0 0 95,751
Financial Core B 6,615,342 59,202 -80,329 -1.2% 5.2% 5.3% $25.09 $24.09 0 0 0
Downtown B 17,930,799 230,570 79,319 0.4% 3.3% 3.7% $24.73 $22.19 0 0 95,751
Bloor B 4,802,004 -9,514 76,309 1.6% 2.9% 3.2% $24.54 $20.55 0 0 0
Eglinton B 2,467,985 44,897 103,816 4.2% 5.2% 5.6% $15.83 $16.69 0 0 0
St.Clair B 1,314,596 7,919 5,196 0.4% 1.7% 2.4% $20.64 $21.12 0 0 0
Midtown B 8,584,585 43,302 185,321 2.2% 3.4% 3.8% $20.89 $19.28 0 0 0
East B 10,706,846 -109,597 -90,070 -0.8% 13.5% 14.1% $12.25 $14.31 0 0 0
North B 4,736,262 32,361 29,237 0.6% 7.6% 7.8% $16.81 $17.77 0 0 0
West B 12,231,081 71,191 66,707 0.5% 21.0% 21.6% $15.04 $13.22 88,446 88,446 0
Suburbs B 27,674,189 -6,045 5,874 0.0% 15.8% 16.3% $14.38 $13.90 88,446 88,446 0
Greater Toronto Area B 54,189,573 267,827 270,514 0.5% 9.7% 10.1% $16.07 $15.27 88,446 88,446 0

Downtown East C 2,413,391 3,706 27,010 1.1% 1.5% 1.5% $23.73 $20.28 0 0 0
Downtown North C 1,205,301 32,554 29,194 2.4% 1.7% 1.8% $18.81 $16.83 0 0 0
Downtown South C 50,000 0 0 0.0% 5.0% 5.0% - - 0 0 0
Downtown West C 6,664,571 96,871 111,700 1.7% 3.3% 3.5% $27.02 $14.39 0 0 0
Financial Core C 845,299 38,692 6,845 0.8% 2.3% 2.8% $27.35 $21.88 0 0 0
Downtown C 11,178,562 171,823 174,749 1.6% 2.7% 2.8% $25.62 $15.92 0 0 0
Bloor C 535,761 -5,444 21,899 4.1% 1.0% 1.0% $18.50 $20.81 0 0 0
Eglinton C 508,149 1,711 11,531 2.3% 1.6% 3.4% $15.00 $14.86 0 0 0
St.Clair C 163,601 0 0 0.0% 0.0% 0.0% - - 0 0 0
Midtown C 1,207,511 -3,733 33,430 2.8% 1.1% 1.9% $17.69 $19.43 0 0 0
East C 2,814,606 -8,911 19,648 0.7% 8.1% 9.0% $9.72 $11.86 0 0 0
North C 1,089,810 0 -2,934 -0.3% 3.0% 3.1% $12.99 $13.92 0 0 0
West C 3,793,574 36,927 66,187 1.7% 10.8% 11.0% $11.91 $11.00 0 0 0
Suburbs C 7,697,990 28,016 82,901 1.1% 8.7% 9.2% $11.55 $11.43 0 0 0
Greater Toronto Area C 20,084,063 196,106 291,080 1.4% 4.9% 5.2% $17.34 $13.35 0 0 0

Julian Lo - julian.lo@am.jll.com | Chad Piche - chad.piche@am.jll.com

22 Adelaide Street West, Toronto, ON M5H 4E3 | tel +1 416 304 6001

2018 Jones Lang LaSalle IP, Inc. All rights reserved.