| Almost half (46%) of office spaces in the Greater Toronto Area (GTA) could remain vacant by 2041, according to a report by the Toronto chapter of the National Association for Industrial and Office Parks (NAIOP). Since the beginning of the pandemic, the GTA region has seen a surge in empty office buildings as many companies opted to work in a remote or hybrid setting. There are too many office buildings being built right at a time when demand has slumped to record lows.
The report stated that office vacancies in high-rise buildings would vary between 16.5% and 45.7% by 2041, depending on the hybrid work model. The vacancy rate in 2041 would be 16.5% in the case of a hybrid model scenario with four days a week of in-office presence. The vacancy rate increases to 31.1% and 45.7% in the case of three and two days of in-office work per week, respectively. Peter Norman, who prepared the report, said, "We've had a paradigm shift in how much space is required to accommodate jobs. If I'm a company setting up, am I going to set up four chairs for every ten people I employ? Or am I going to set up six chairs or eight chairs?" He added, "Almost nobody who is setting up a new space for their company right now is going to set up ten chairs for the ten people they expect to employ." The current office vacancy rate is at a level not seen since 1995. The report said 35 million square feet of office space are available to lease in the GTA region, more than twice the quantity from the first quarter of 2020. As more supply is added through the completion of projects that are in the backlog, the oversupply is expected to last a few decades. Several experts have called for converting office buildings into residential buildings to address housing affordability. A recent Avison Young report identified 923 such buildings in Toronto, along with 13 other major North American markets. However, critics of the idea have pointed to concerns regarding the feasibility of such conversion. The NAIOP report forecast if office buildings with potential are converted into residential, it would add around 163,000 units. According to Savoie, senior vice-president at Dorsay Development Corp, in some cases, demolishing the building and building something new makes it cheaper. She pointed to strict municipality rules for converting commercial buildings into housing or knocking down a building. Other recommendations in the report include rethinking the City of Toronto's urban structure, coordinating the region's approach to planning for office space, waiving or reducing Municipal Land Transfer Tax, and accelerating and/or extending the commercial property tax ratio reductions. |
