Ellington Index Shows A Landlord’s Market in the GTA

Prospective tenants and landlords markets know all too well that rents rise and fall based on supply and demand. So it should be no surprise that new buildings coming on stream or major chunks of commercial space coming available for lease is good news for tenants.

Leasing consultants Ellington Tenant and Facilities Services have found that the landlords in the Greater Toronto Area still have the upper hand – by a little bit – over tenants in the third quarter but that the market is inching back to a more even keel given recent developments in the country`s largest market for commercial real estate.

Ellington finds landlords have a 53 to 47 edge in their eponymous index in the third quarter, down a percentage point from the previous three months. A “balanced” market would be 50-50 under the firm`s scenario.

“The change in the index can largely be attributed to new supply coming on to the market,” said Scott Mulligan, a broker and partner of the Toronto-based tenant representation firm. Specifically, large blocks of space are expected to be coming available in the financial core sometime in 2012. Class A locations in First Canadian Place, Commerce Court West and 77 King St. W. as well as space in less expensive buildings such as 250 Yonge St. and the CBC Building are being vacated.

New buildings such as Oxford Properties recently announced 950,000 sq. ft. office and the prospect of other new downtown towers are also giving tenants more bargaining power in their negotiations with landlords.

Slowing “deal velocity” is another factor that is handing more leverage to prospective tenants, Ellington found in its study. “While the summer remained somewhat active, compared to the previous quarter, September’s deal velocity dropped,” stated Mulligan. “Limited tenant movement is another contributor to the change in our Index.”

Mulligan, whose firm is active in a number of other major Canadian markets on behalf of tenants, noted that Toronto remains a better market for tenants than cities such as Calgary or Vancouver. “The Calgary market has become very tight again. It is like a light switch went on. It has become a landlord’s market.”

Markets swing for and against tenants and landlords for idiosyncratic reasons, Mulligan said. “Calgary becomes a landlord or a tenant market relating to the economy and of course the oil and gas sector,” he said.

“Whereas Vancouver’s situation is much more of a physical issue. There are physical limitations present in the mountains (and ocean)” as well as municipal regulations that favour condo development over commercial space that have limited options for tenants, he said.

Ellington Tenant and Facilities Services was established at the beginning of this 2011 by a trio of former Colliers employees: Mulligan, Rick Comish, Michael King, all three of whom are managing partners.

In addition, Ellington recently hired Nancy Harris out of Intact Insurance where she was corporate services director. She is Ellington`s vice-president of facility services.

About the Ellington Index

Developed by Ellington Tenant and Facilities Services, the Ellington Index is designed to take into consideration a variety of factors that influence the commercial real estate market on a quarterly basis. With 50 marking an equilibrium in the balance of power, a score above 50 reflects a “Tenant’s Market” and conversely a score below 50 reflects a “Landlord’s Market”. – More information about the Ellington Index.



Paul is a writer, editor and media trainer based in Toronto with over 25 years of experience as a business reporter. He has written for Canada’s major news services on…

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Paul is a writer, editor and media trainer based in Toronto with over 25 years of experience as a business reporter. He has written for Canada’s major news services on…

Read more




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