The suburban construction pipeline continued to be carried forward, currently boasting more than half a million sq. ft. of office space under construction. 

Commercial real estate firm CBRE says for the second quarter in a row, the country’s suburban office vacancy level was lower than the rate seen for downtown regions.

The firm says the national suburban office vacancy rate was 16 per cent in its most recent quarter, while the national downtown office vacancy sat at 16.9 per cent.

During the second quarter, seven out of 10 Canadian markets recorded tightening suburban vacancy, most often in larger magnitudes than were seen downtown.

Positive Shift in Market Does Not Necessarily Mean a Recovery

The suburban GTA office market recorded roughly 457,000 sq. ft. of positive net absorption over the quarter. This marks the first instance since Q1 2020 that net absorption has been overall positive. These encouraging results were primarily driven by the Markham North & Richmond Hill submarket in the East, and the Airport Corporate Center submarket in the West, where 123,000 sq. ft. and 185,000 sq. ft. of positive net absorption were recorded, respectively.

As the flight-to-quality trend seen throughout various markets in previous quarters continues, 60.2% of the overall net absorption in the market was also accounted for by Class A space. While this quarter’s uptick in leasing activity is encouraging and might signal a start of recovery from the effects of the pandemic, current economic uncertainty amidst a looming recession is likely to deter occupiers’ confidence in the market for a little while longer.


Suburban Construction Activity

Development in the suburban office market is slowly gaining traction. The total space under construction in the market has more than doubled year-over-year, with 675,000 sq. ft. currently in progress. The East market leads construction activity, with an estimated 473,000 sq. ft. of Class A office space in the pipeline. Metrus, who is currently developing the largest of the four eastern sites, continues construction of The Crosstown Place at 844 Don Mills Road. The 265,000 sq. ft. office tower has approximately 55.0% of the original space still available, as the anchor tenant Celestica, had already pre-leased the top 3 floors. Construction at 60 Mobile Drive continues as well, with 76.0% of the 124,000 sq. ft. redevelopment already pre-leased to it’s anchor tenant OSSTF. 

Veering to the North market, G Group Developments is currently constructing the third largest office project across the suburban market and has already broken ground late last year. The 10-story mixed-use office tower is located at 5250 Yonge Street and is set to add an additional 119,000 sq. ft. of office space to the market, and another 80,000 sq. ft. of retail below. The West market is trailing slightly behind the North and East in terms of the size of projects under construction. However, it is the only suburban market to see new supply this year and is still expected to receive an additional 83,000 sq. ft. of new supply over the next two quarters.


Despite uncertainty about future office demand — combined with a near-term economic slowdown, rising financing and construction costs, and labour shortages no developments have paused construction and landlords remain committed and optimistic.