The Greater Toronto Area (GTA) runs the risk of having a significant oversupply of office space that will impact the market until at least 2041.
A new report prepared by Altus Group and released by NAIOP Greater Toronto predicted the near-future with three hybrid work scenarios that found employees in their offices on either a two-, three- or four-days-a-week scenario. In all but the four-day scenario, the report said millions of square feet of surplus office space will be in place for up to 18 years – and in a four-day scenario only 15 million square feet of new space would be required, which is about half of the pace of office demand seen prior to the pandemic. As a result, the GTA office market will carry vacancy rates between 16.5% and 45.7%.
“As an association representing office building interests, it is unusual for us to recommend policies that would result in less office space,” said NAIOP Greater Toronto President Christina Iacoucci. “However, with a likely significant oversupply of office space lasting potentially for decades, governments need to respond to changing work patterns and economic priorities. Many global urban centers are already addressing this challenge. A significant economic development risk facing the GTA regional economy is the oversupply of office space. By pruning older obsolete buildings through conversion and planning flexibility, we can foster the overall sector’s health and help address the housing shortage in the region.”