‘Flight to quality’ in Toronto’s Financial Core: where are we now?

‘Flight to quality’ is often cited in the office real estate market when describing periods of increased absorption or decreased vacancy levels in higher-quality office buildings compared to that of lower-quality buildings. One way of quantifying this relationship is the spread in vacancy rate of Class B buildings versus that of Class A and Trophy buildings.
In Toronto’s Financial Core, this relative measure has expanded from -2.2% in Q4 2019, indicating a Class A vacancy rate above its Class B counterpart, to 9.2% in Q2 2024, reflecting a strong preference for higher-quality office space. These figures compare to an average spread of 2.1% since Q4 1999.
Historically, periods of uncertainty have provided tenants seeking office space the opportunity to improve the quality of their space, benefitting from more available options at more tenant-friendly pricing.

August 23, 2024

Flying High – Class B vs. Class A Vacancy in Toronto’s Financial Core