Good piece on WNPR radio in Connecticut about the future of suburban office parks. There is a growing concern in the United States about large office parks built during the 1970s and 1980s. Many businesses are moving downtown and leaving their old headquarters vacant, leaving fears of a “Suburban Corporate Wasteland” in their wake.
While the piece focuses on a handful of sites in Connecticut, Toronto has recently seen high-profile businesses move to core from the suburbs. For example, Coca-Cola is moving downtown, leaving its “mad men” era building in the Thorncliffe Park neighbourhood. Other companies that have made or are about to make the move include SNC-Lavalin, Google, Deloitte, and Telus. This has lead to articles such as “Why corporation are flocking back to downtown Toronto.”
The Urban Land Institute has picked up on the trend and is bearish on suburban office markets in Toronto. Their 2014 Emerging Trends in Real Estate states that:
“‘Related to the trend of urban intensification, suburban office is a declining commodity that has no staying power,’ says an interviewee. Suburban office is becoming less competitive as companies return to the urban core and companies take less space. As this space becomes vacant and needs to be refurbished to be competitive, the suburban market softens even further.”
So are Toronto’s office parks likely to become corporate wastelands?
I’m not ready to write them off yet. A recent Canadian Urban Institute (CUI) report provides a very detailed assessment of the evolution of the office market in the GTA. The CUI argues convincingly that the statistics do not prove that the 25 year trend of significant office growth in the suburbs is slowing.
While demand is shifting to the core it hasn’t disappeared from Toronto’s suburb. Yes, vacancy rates are higher in the suburbs than downtown, 7.8% versus 4.6%. But as seen in the chart below most of the new office space built since the 1990s has been in the suburbs. With so much growth in supply it’s not surprising that vacancy rates are higher.
Note: 905 and 416 are Torono Telephone Area Codes. 905 is shorthand for those areas that have grown quickly since the 1970s. 416 for those areas that grew from the 19th century to the 1960s .
Furthermore, while major moves to the core are attracting attention, building has continued in the suburbs. Major companies such as SNC-Lavalin, PricewaterhouseCoopers and Novartis Animal Health have been expanding or adding new offices in suburban centres such as Meadowvale and in Mississauga Town Centre.
While suburban office parks are becoming corporate waste lands in Connecticut, in Toronto it looks as if they are here to stay. The challenge in the GTA won’t become how to deal with large vacant office campuses, but how to bring transit and amenities into these areas so they can stay competitive and become more adaptable, diverse, and accessible.