The Global Office Market in 2019

Avison-Young recently published their Mid-Year 2019 Global Office Market Report; you can find the report here. Below I summarize the key findings.

The first chart shows the total office inventory (by square foot) for the downtown and suburbs in 40 cities across the world.

Total SF

* Data by geography unavailable for German cities

US cities show wildly different breakdowns between downtown and suburban office space, with NYC exclusively comprising downtown office space, while many major cities in the south like Dallas, San Jose, Phoenix, LA, Houston have more than 80% of their office space located in the suburbs (this is also to do with how Avison-Young devises their boundaries for the downtown and suburbs). Toronto in comparison has about 45% of its office space located downtown, which is similar to the ratio present in other large Canadian cities. 

Next chart shows the vacancy rate for total office space (downtown + suburbs).


Calgary leads the cities with the highest vacancy rate – largely due to the energy crisis of 2014/2015. Following Calgary are predominately southern US cities like Houston, Dallas, LA and Atlanta. Houston and Dallas are a bit of a surprise given their recent growth and fairly strong local economies. German cities in general have the lowest vacancy rates, with London, Vancouver, Toronto, Austin and San Francisco also joining the top 10. Next chart breaks the vacancy rate down by geography.


Generally the suburbs exhibit higher vacancy rates. Cities with higher vacancy rates in their downtowns include Calgary, Houston, Dallas, LA, Phoenix, Pittsburgh, Miami and St Louis. Toronto and Vancouver showing the widest spread in vacancies between geography.

The following chart shows office space completions and absorptions between Q3-2018 and Q2-2019 (in square feet).


I was especially curious to compare absorptions to completions as a ratio to gauge general demand levels for office space in individual cities. Cities closer to the right of the chart are clearly experiencing high levels of office space absorption, that is not well matched by supply. What is also evident is the high quantities of office space completions over the last year in cities like London, Seoul, Washington DC, Dallas, Mexico City, and Philadelphia. Based on the chart above, London, Seoul and Washington appear well capitalized to absorb all that new office space (although Brexit and the US election may impact London and Washington, respectively).

The next chart shows the amount of office space under construction (in square feet).


* Data by geography unavailable for German cities

And the chart below breaks the under construction space by preleased and un-preleased space.


* Leasing data unavailable for Seoul 

In Canada, office buildings generally need to reach prelease levels of about 40% to 60% in order to secure financing for construction. Toronto seems to be within that range, with about 70% of new office space preleased. On the other side of the chart are Mexico City and Phoenix with about 5% of office space preleased. If you look at the first chart in this article, you won’t notice Mexico City anywhere near the list of cities with the largest inventory of office space. In fact, Mexico City has only about 60 million square feet of office space. But the city is experiencing a huge office building surge with over 20 million square feet of office space under construction.

The final two charts show rents broken down by downtown and suburban office space, and price per square foot of office space and cap rates.


Not surprisingly, downtowns command higher rents than the suburbs for office space. However that is not entirely the case in San Jose/Silicon Valley, Los Angeles, Phoenix, Dallas, Calgary, Columbus and St Louis. These cities are generally made up of expansive, auto-dependent suburbs with healthy offices districts that rival the downtown.

The final chart (below) shows the price of office space per square foot, including the cap rates for office space. There is a clear correlation between the two, with lower cap rates often evident in cities with highly priced real estate values. Toronto and Vancouver both show lower cap rates relative to its peers with similarly priced office space values. This is likely to continue to put upward pressure on office rents in Toronto in the short term. However, with a large supply of office space under construction, Toronto’s rents are likely to stabilize in the mid to long-term. German cities have the lowest cap rates by far. This could be due to high priced office space in the big 5 German cities.


* Office values for German cities unavailable

Property Values and Rents in 35 Major Global Cities

CBRE published a fascinating report earlier this year examining the housing markets in 35 cities. Below I’ve summarized some of the key findings of the report and show how property values and rents in Toronto compare to other major global cities.

The first chart shows Average Property Prices (as of 2018, in USD $) for the 35 cities –


The highest property prices, by some margin, are in Hong Kong, followed by Singapore, Shanghai and Vancouver. Hong Kong also leads the global residential property market on a $ per sq ft basis, while other cities in the top 10 include cities such as Paris, London and New York. On the other side of the chart are cities like Istanbul, Ho Chi Min City, Bangkok, Kuala Lumpur and Lisbon. Istanbul is understandable given the economic malaise Turkey has been facing for about a decade (despite Istanbul being a growing and very dynamic city). Lisbon however I did not expect to be valued so low, given the investment taking place in the city and the burgeoning tech scene. But that investment could be attracted to the city due to its low property prices. 

The next chart shows change in property values for the 35 cities between 2017 and 2018 –


House prices continued to grow in all but 5 of the 35 cities analysed; while four cities (i.e., Barcelona, Dublin, Shanghai and Madrid) saw double digit growth. Of the 5 cities that faced a decline in property values, are interestingly enough in the Middle East (i.e., Abu Dhabi, Dubai, Jeddah and Riyadh). As well, 7 of the top 10 high growth cities are in Europe (including Moscow and Istanbul). 

The following chart shows the average monthly rent as of 2018 in USD $ –


The most expensive city in which to rent a property today is New York, with Abu Dhabi, Hong Kong, Jeddah and London not far behind. Toronto and Vancouver are closer to the lower end of the chart, with low rents relative to other major global cities. Keep in mind that the figures shown in these charts are in USD.

The chart below shows % Change in Monthly Rent between 2017 and 2018.


Demand for flexible rental properties keeps rising across the world, which impacts rental costs. Five European cities feature in the top 10 annual rental growth chart, including Lisbon, Madrid, Dublin, Barcelona and London, with the other five from Asia (Hong Kong), North America (Vancouver, Toronto and Montreal), and South Africa (Cape Town).

Finally I wanted to show a chart that exhibits the ratio between property values and monthly rents to gauge generally in which cities yield might be highest if you were investing in rental residential properties. Keep in mind this is a very crude and rudimentary analysis, and does not take into account other critical factors associated with investment properties.  


Southern European cities predominate the low end of the chart with low property values and high rents. On the other side of the chart are Vancouver, Cape Town and Toronto. Despite growing interest in renting in Canadian cities, rental rates are too low in some cases relative to property values for an investor to meaningfully make a profit – but they are growing (as seen in the previous chart). My previous article on which investment instrument would yield a better return (i.e., S&P 500 or Toronto real estate?) touches upon the topic of rent coverage costs. 

Overall the CBRE report presents some fascinating information and insight into the housing markets of 35 global cities. I feel however that the analysis would have provided a more complete picture of the relative situation in the global housing market with the addition of other major global cities across the world. For instance, no cities from South America, Japan, South Korea, Germany, the Netherlands and the Scandinavian countries are featured in the analysis – and many cities across these countries are recognizable and prominent on a global stage. As well, San Francisco would have been another interesting addition. 

The State of the Resale Housing Market in Toronto’s Neighbourhoods

Following up to my post from a few weeks back on the general trends of the resale housing market in the Greater Toronto Area (GTA), I wanted to take a bit of a deeper dive into the neighbourhoods of Toronto with the following article.

Below is a map of the neighbourhoods (called “municipalities” by TREB) in Toronto that I will be referring to throughout this article. You can view the interactive map here


First up is a chart showing how all the neighbourhoods in terms of dwelling values have performed since 1996 (indexed to 1996, and from lowest to highest shown). The City Average shows dwelling value growth rate of approximately 400% (or 13% annually) since 1996 (not accounted for inflation).

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To give you a sense of the price divergence between the worst and best performing neighbourhoods, I’ve charted out North York Centre East (C14) and Leslieville-Riverdale (E01), shown immediately below, as well as provided two charts that show the 5 lowest and highest growers relative to the city average.


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An important caveat to note here – some neighbourhoods such as the North York Centre’s (C07 and C14), Yonge-Eglinton (C10), and the Downtowns (C01 and C08) may show relatively lower dwelling value growth to 2019, and it is largely because the majority of transactions in those neighbourhoods are condos, which are priced lower than ground-related homes and have appreciated in value less since 1996. A good way of highlighting such a trend is to compare Yonge-Eglinton (C10) to adjacent neighbourhoods such as Forest Hill-Oakwood (C03) and Yonge-Lawrence (C04), as shown below.


Over the last 10 years, condo sales in Yonge-Eglinton accounted for about 60% to 70% of total dwelling sales, compared to about 20% to 30% for Yonge-Lawrence and Forest Hill-Oakwood. When you further unpack the data and measure annual appreciation by dwelling type, ground-related housing (singles, semis, towns, rows) in all three neighbourhoods has appreciated by virtually the same rate since 1996 (as shown in the chart below). 


The three highest growth neighbourhoods since 1996 are all next to one another, and they are – Leslieville-Riverdale (E01), East York-O’Connor (E03) and the Beaches (E02).

The next chart shows changes in dwelling values by neighbourhood between 2009 and 2019 (indexed to 2009).

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Although at first glance there appears to be an interesting mix of neighbourhoods occupying the top spots since 2009, Rosedale-Moore Park (C09), Rockcliffe-Smythe-Rogers (W03), East York-O’Connor (E03) and Leslieville-Riverdale (E01) all experienced some of the highest apprecitation since 1996 as well. On the other side of the chart are neighbourhoods such as Wilson Heights (C06), Etobicoke Centre (W08) and Bayview Village-Parkway Forest-Don Valley (C15), which experienced below city average growth since both 1996 and 2009.

The next charts shows changes in dwelling values by neighbourhood since April 2017 (Indexed to April 2017).

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Interesting findings include:

  • As of May 2019, Toronto’s average dwelling price is almost back at its April 2017 peak
  • Price appreciation in the Downtowns (C01 and C08) can be attributed to the continued growth in condo values.
  • The three highest growth neighbourhoods since 1996 (Beaches (E02), Leslieville-Riverdale (E01) and East York-O’Connor (E03)) have all exhibited great stability since April 2017

Below I show how resale dwelling prices in two different neighbourhoods, Don Mills (C13) and Mimico-Long Branch (W06), have performed since April 2017, along with the 5 worst and best performers. Dwelling values in Mimico-Long Branch have grown by roughly 20% since 2017, while Don Mills is experiencing about a 33% deterioration in values.


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Finally I want to chart out the average length of days a home stays on the market and the months of inventory historically to get a sense of sales levels strength by neighbourhood

The first chart below shows months of inventory for 6 year periods starting from 1996.

Months of inventory is derived by dividing the active listings by the total number of sales in a given month to determine, hypothetically, how long it would take to sell all the homes currently on the market (if no other houses were to come on to the market).

What is most fascinating about the chart below is that the period with the second lowest level of months of inventory (on average) was between 1996 and 2001, while the most recent 5 year period unsurprisingly shows the lowest level of months of inventory. The neighbourhoods with the lowest levels of months of inventory on average include Beaches (E02), Leslieville-Riverdale (E01) and East York-O’Connor (E03) – which were also the best performing neighbourhoods in terms of rate of price appreciation since 1996. Months of inventory appears to be highest in some of the wealthiest neighbourhoods and most impoverished ones.


The final chart below shows the average days a home stays on the market before it is sold (or removed off the market). Once again, the infamous trio – Beaches (E02), Leslieville-Riverdale (E01) and East York-O’Connor (E03) take top spot. Following this group is (like the previous chart) Yonge-Eglinton (C10), Bloor West Village (C15) and Sunnylea-Queensway (W07). On the other side of the chart are generally the same neighbourhoods that also exhibit higher levels of months of inventory. What is also clearly evident in the chart is the decline in the number of days a home stays on the market in Toronto over the years. The number of days a home stays on the market today compared to the period between 1996 and 2001 has been halved.


Overall key takeaways:

  • As of May 2019, Toronto average dwelling prices have virtually reached their peak 2017 levels
  • Some of the neighbourhoods to have bought in that exhibit the highest growth rates and generally strong sales levels include the infamous trio of Beaches (E02), Leslieville-Riverdale (E01) and East York-O’Connor (E03)
  • Homes in Toronto on average are spending about half the time on the market over the last 6 years compared to the period between 1996 and 2001
  • Months of inventory shows greater stability throughout the years compared to days spent on the market, but the last 6 years show strengthened sales levels, with about 1.9 months of inventory – meaning that of 19 homes that are actively listed in any given month, 10 sold