Condominium Development

Commercial development has been growing in concert with residential development. There are currently 58 residential projects under construction in downtown Toronto, with an additional 27 in the pre-construction stages.

As residents and workers continue locating downtown, infrastructure must be expanded to accommodate the increased demand. To help traffic congestion and transit backlogs in the Greater Toronto Area, Metrolinx launched The Big Move project. The first wave of this 25-year, $50-billion transit plan is currently underway. Projects that will alleviate downtown congestion include the Union Pearson Express and the Union Station Revitalization.

This confluence of downtown office development, urban high-rise residential, and a renewed emphasis on public transit is a rising trend. This trend is true not only in Toronto, but also in all of Canada’s major urban centres and a growing number of U.S. cities.

Hotel Investment

Hotel transaction volume climbed to over $2 billion in 2013, up 72% year-over-year and taking place as the third highest year on record after 2006 and 2007. The market was flush with capital and the strong and diverse rotation of buyers and sellers saw an opportune time in the cycle to take advantage of current conditions. This year’s report includes the special feature “Investment Rotations & Motives”, providing a glimpse at broad buyer/seller investment flows in Canadian hotel ownership over the past decade.

Foreign investment in Canada grew to the highest levels since 2007 with close to $857 million in volume from nine hotel transactions. The most notable was the five-property Westin Canadian Hotel Portfolio, comprising 89% of foreign activity. Purchased by an affiliate of US-based Starwood Capital Group and backed by Middle Eastern investors, this transaction had a significant impact on overall pricing and metrics for the year given its size and scope.

The value of Canadian hotel real estate, which we derive from 17 major markets, grew an estimated 4.8% in 2013 following the 4.0% growth seen in 2012.

Office Buildings

Development in downtown Toronto has been steadily increasing in recent years, driven by an influx of workers and residents into the downtown core. Activity has been strong in both residential and commercial construction, as well as the infrastructure intensification necessary to support this growth. Following a near-20 year construction lull, six Class A office towers totalling 4.4 million SF were completed between 2009 and 2011. With office vacancy rates currently at historical lows and few large blocks of space available for tenant relocations, a new construction cycle began in the second quarter of 2012.

There are currently 5.9 million SF of Class A office space under construction in downtown Toronto. The first of these eight buildings will be coming online in 2013 with the remainder expected to be completed by 2017.

Canada is in the midst of a commercial office boom. We have started another office development cycle. What’s difference about this cycle is that we have more downtown development.