Toronto’s Real Estate Market
We caught up with Daniel Holmes, Senior Managing Director at Colliers International. Based in their Toronto office, Dan’s role is to implement strategies to support and mentor the firm’s internal resources and track the insights, factual data, market trends and projections to maximise the potential of property. Below we talk to Dan about Toronto’s real estate market and the things that position Colliers at the forefront of the commercial real estate industry.
Tell me a little bit about yourself and your role at Colliers International.
I joined Colliers in 2002 and have been promoted through the organisation over the course of my career. I started as part of the brokerage team, completing over 500 transactions and providing a full range of services to both national and international clients. My strength is in building lasting relationships with clients and advisers which in turn helped me achieve my longterm goal of joining the Colliers leadership team in 2015. My leadership philosophy is that it’s through relationships and trust that loyalty and influence are earned. I want my team to follow me into battle because they want to, not because they have to. New disruptors, whether they’re small or large, create opportunities to move your team ahead through change management. It is essential to have a team to believe in and work towards the same goals to capitalise on this fast pace industry.
Downtown Toronto, by all accounts, has become the tightest office market in North America and might
be getting tighter despite new supply. What is your take on this statement and what would you recommend to tenants?
Our projections show that the market will continue to tighten for tenants. Relief will be available for tenants in 2021 after new developments at 81 Bay Street and 16 York Street are delivered and tenants vacate older buildings to migrate to the new developments. Of the 720 built properties in the downtown and midtown markets, only 29 can accommodate a user 30,000 square feet; that’s 4.0% of all properties. To put that into context, 30,000 square feet is approximately one full floor sized tenancy in any given bank building. Tenants are now starting their real estate exercises earlier than the traditional 12-18-month lease expiry outlay as a means of securing their future workplaces.
“Tenants are now starting their
real estate exercises earlier than
the traditional 12-18-month lease
expiry outlay as a means of
securing their future workplaces.”
What are your thoughts on coworking and how has it added or taken away from the Toronto market?
Fixed vs flex, the world of commercial real estate is changing quickly. As advisers, we look at coworking providers and flexible providers as a solution to our clients’ business needs. Flexible providers are changing the landscape of our industry and this is disrupting traditional ideology. Giving people more choices about how and where they work – now that’s exciting! Today, flex space represents less than 1.1% of Toronto’s overall market and when compared to other places like London and Manhattan, which reported 5.1% and 2.1% respectively at the end of 2018, we still have room for growth.
One example of a young tech firm navigating the challenging office market due to exponential growth in a short period of time is Colliers’ tenant, Peninsula Group – a provider of remote HR and health and safety services. Like many new entrants to the Canadian market, Peninsula began leasing coworking space at WeWork for their first 8 employees, which quickly expanded to accommodate 45 employees. After only ten months, the company outgrew their coworking space and needed to find a new solution. Today, they have secured over 17,000 square feet of office space in downtown Toronto for their now 180 employees.
Why is it important for tenants to consult a professional when faced with a complex issue?
Ten years ago, we asked our clients how many square feet they needed. Five years ago, we suggested we would save them money on their rental rates through negotiations and what type of space designed they wanted to complete tasks and activities. Now we are asking them what type of workplace they want for their employee experience. It’s no longer only about saving tenants money on a per-square-foot basis through negotiations with landlords. Real estate represents between 3% – 7% of most companies’ fixed operating budget. We can help save companies money by advising them on choosing the right location that helps increase productivity and helps retain and attract top talent.
With up to 90% of an organisation’s costs dedicated to human capital, companies need to consider the value of employee engagement and creating work environments dedicated to HOW employees work best within a space. Creating functional employee experiences (“EX”) within the workplace will help foster a high level of employee engagement. This nurtures a profound connection to the company and increases retention, enhancing the ability to drive innovation, increase profitability, and move an organisation forward.