The Future of Toronto’s Commercial Real Estate Market

As Toronto, Canada, and the rest of the world learn to live with pervasive uncertainty during a global pandemic, it appears increasingly evident that the only thing we can accurately predict is continued change and transformation.

One area that will inevitably undergo transformation is the relationship between individuals and their public and workspaces. This phenomenon will be even more pronounced in big cities like Toronto and will fundamentally impact and shape and future of real estate development, in particular commercial real estate. What stands to be seen is whether these effects will remain in the long term, even after COVID-19 ceases to be as much of a threat as it is now.

The Shift Towards Working from Home

One of the main trends of 2020 has been a move towards telecommuting or working from home. This allows workers and companies to do their part in ensuring social distancing and minimizing contact among potentially infected individuals. To be clear, this repositioning had started long before this year, but the global pandemic has served to greatly precipitate this move towards working from home.

Because of the advantages, it affords workers and the savings it can bring to companies’ overheads; many economists and commentators now wonder whether this might be a new reality; in which case, many of the workers would never return to their original workplaces. Yet, of course, there are also drawbacks to this model, such that many others argue that there is no substitute for having workers together in the same physical space.

What Will Happen to Toronto’s Commercial Office Properties?

What, then, can we predict about the near and distant future of commercial office properties in the metro area? Will the shift towards working from home prove meaningful for all companies, or will companies and their workers return to their places of work, restoring some sense of normalcy and equilibrium? It is clear that Toronto’s financial district will face a rocky road to recovery. Another critical piece of this puzzle is the PATH, and how it can avoid an exposed and undesirable fate.

Will the PATH Recover?

The PATH, which not long ago saw 250,000 people daily transit its vast 30km network, now feels like a ghost town, and many Torontonians now worry about its future.

Places like the PATH are particularly hard-hit by crises such as the COVID-19 pandemic because they are built on a model that relies on a high concentration of foot traffic, particularly given the high rent payments businesses must pay to operate there.

Now, it is unclear when, or if, workers will return to the Bay Street skyscrapers and infuse the PATH with the lifeblood it so desperately needs. Yet, even if workers return in anything approximating pre-COVID-19 volumes, the PATH, and other dense urban clusters, will still have to abide by the logistical difficulties involved in maintaining safety measures in narrow, enclosed spaces with little to no access to fresh air or space for social distancing measures enforced upon by many municipalities.  Could the path become an underground digital immobilization platform with air controlled pods?

Yet, this vast subterranean network is a critical part of the financial district, and therefore a key component of Toronto’s history. After all, it connects the headquarters of Canada’s five largest banks, Eaton Centre and Scotiabank Arena, the Hockey Hall of Fame, and over a thousand retail spots. Not to mention an until-recently-booming office-building expansion, which led to Toronto being virtually unrivaled among North American cities in terms of volume of commercial construction.

Whether the city will witness a return to equilibrium remains to be seen. What is fairly certain, however, is that Bay Street workers will have to return to their offices for this to happen. While there is a case to be made for cautious optimism, there is no escaping uncertainty in the short- to medium-term.

Contact Creiland Consultants Realty Today

Creiland Consultants Realty is a full service disciplined commercial real estate advisory firm based in Toronto, Ontario. The management team consists of Certified Commercial Investment Member (CCIM) with extensive experience in a wide range of asset classes across the Greater Toronto Area. We are here to support your goals and take pride in being a commercial real estate partner you can trust. Visit our website to learn more!