It took 15 years to build Toronto’s Eglinton Crosstown Light Rail (Line 5) which stretches 19 kilometres along Eglinton Avenue, an east-west in the central portion of the city.
But in its recently released Toronto Office Market Dynamics report, real estate and investment management firm JLL Canada says the light rail transit system will be the catalyst for increased residential and commercial development along that corridor.
“This new transit connection substantially enhances commuter accessibility and is anticipated to strengthen the appeal of the Yonge and Eglinton (Yonge Street and Eglinton Avenue) node for both tenants and investors,” it states.
“Indeed, office availability has already fallen from 26.9 per cent in 2024 to 21.9 per cent in the first part of this year as companies began leasing space in anticipation of the new transit link.”
With its opening this past February, the LRT has expanded transit access within a 10-minute walk of several key suburban office nodes, the report notes.
Given the project’s well-documented delays and cost overruns over its construction period, there was a certain amount of risk for those companies that have leased space, says JLL Canada’s senior director of research and strategy Scott Figler in response to some emailed questions.
However, those companies likely calculated the eventual completion, however delayed, was inevitable and that securing space early would position them advantageously before rents adjusted upward post-opening, he says.
“While the report stops short of specific predictions, the implication is clear: enhanced transit accessibility creates a foundation for sustained commercial activity, though the full impact will materialize over time as the residential base grows and companies increasingly value the improved commuter accessibility,” says Figler.
Along with the news ridership on the Toronto Transit Commission is steadily improving, the prediction of LRT-driven development along Eglinton is one of number of positive scenarios in the report. It focuses on the entire Greater Toronto Area (GTA), not just the city of Toronto, and is divided into three main segments: Downtown, midtown and the suburbs.
In the downtown or “Urban Toronto” area, there was strong leasing momentum in the first quarter of this year with gross leasing volume exceeding 1.7 million square feet. Driving that activity was expansion and renewal leases in the financial sector by institutions like RBC, CIBC and Wealth Simple.
And that activity is causing a ripple effect on different types of office buildings and in different geographic areas.
With ultra-high tier premium or “trophy” buildings at full occupancy, demand for space is increasingly spilling over to the next level of transit-connected Class A buildings and in different parts of the city.
Over the past six months availability in Class ‘A’ buildings has fallen from 32.2 to 16.2 per cent in downtown east and dropped from 25.9 to 18 per cent in the downtown west area.
At the same time, what is emerging from the movement of tenants to newer, higher quality buildings from older or less desirable ones is the creation of a number of “shadow vacancies.”
The owners of those buildings are faced with the challenge of finding new tenants, says Figler.
When assessing the impact on rents within urban Toronto, he uses the term “a tale of two markets.”
While there was a 0.5 per cent average rent decline, that figure masks dramatically different performance based on building quality and location. Trophy buildings saw rents increase 1.2 per cent for the fourth consecutive quarter and Class A assets in the financial core experienced a substantial 7.5 per cent quarterly rent increase as those markets tightened significantly.
However, softer submarkets like Bloor and downtown north saw rents fall 0.9 per cent and 4.6 per cent respectively, he says.
“So the overall decline is an artifact of averaging — the strong are getting stronger while weaker properties continue to struggle, pulling the average down even as top-tier assets command record rents.”
There is also sharp contrast between activity in urban Toronto and what has occurred in the suburbs. Only 645,556 square feet of space was leased during the first quarter of this year. Most of that activity was concentrated in smaller transactions of about 5,000 square feet with five- to seven-year terms.
Earlier this year, however, real estate and management firm Europro “made one of the largest investment plays into the suburban GTA market in recent years” when it led a consortium of investors in purchasing two separate North York office complexes, the Yonge Corporate Centre and the North America Centre, for a combined $280 million, says the report.
In assessing that acquisition, Figler says the timing and scale suggest those investors are taking advantage of value pricing in nodes that are well positioned to recover over the next few years.
