Yes, it’s official. Toronto may now actually have too many high-rises.
That’s not news to many, including Jim Flaherty who commented a few months ago that he was concerned about “the last condo buyer in Toronto.” Of course, not all condo are high-rises, and not all high-rises are a condominium, either. That’s been clearly defined by Emporis, a German data-reporting company that has recently taken a look at the number of high-rises in North America, and concluded that Toronto had more than any other city on the continent.
It is true that many of the towers that were looked at during Emporis’ study were in fact condominiums; but they also included offices, hotels, and high-rises of all kinds. As you can see from the chart below, Toronto has the most in North America, more than doubling that of New York City’s. This isn’t a huge surprise, given that one glance towards Toronto’s skies will likely give you more roofs than clouds to gaze at. But Toronto’s not the only city that has an alarming number of high-rises. Montreal currently tops Chicago, another of United States’ biggest cities; and Calgary is tied with Miami.
John Lang LaSalle says that the number of high rises in these Canadian cities are booming so greatly because these cities have a vast amount of commercial space available. At the end of the third quarter, Toronto had a whopping 69.7 million square feet of commercial space; and a vacancy rate of only 5.1 per cent. By the end of this quarter, nine more buildings that will equal a total of 5.6 million square feet are also set to be erected in Canada’s largest city.
But while policymakers might be concerned about the growing number of skyscrapers grazing the skies, there is some good to say about the recent boom. Colliers International recently released stats showing that the average rental rate in the GTA for office space was $17.83 per square foot. That’s a fairly large increase of 13 per cent. And while rising rental rates might not seem like great news (especially if you’re looking for space,) it turns out it is after all. Because as Canada’s economy continues to try to get to pre-recession levels, these rates are already there.
LaSalle also points to the fact that Calgary has also been enjoying a low vacancy rate, allowing for even more development to take place in this area.
But Avery Shenfeld doesn’t think that the high-rise boom can hold out for too much longer, despite those nine that are about to go up in Toronto. He points to the fact that while there were 224,419 housing starts in Canada during 2012 up until September, that’s expected to decline to about 180,000 by 2014. And that, says Mr. Shenfled, will be quite a blow to the market.
“A correction to 180,000 starts by 2014, still a generous level historically, will entail a nearly 20 per cent dive in activity in the sector, representing a roughly one per cent point hit to Canadian GDP growth by 2014. Here’s hoping that by then, better global times will allow exports to pick up that slack.”
