Toronto vs. New York: A Commercial Real Estate Outlook

CBRE's most recent North American office figures put Manhattan's overall office availability rate in the high-teens and Toronto's downtown availability above 18%, both still well above their pre-pandemic baselines around 9-10%. The headline numbers, though, hide the split that has shaped both markets for the better part of three years: a small group of newer, well-located towers leasing briskly, and a much larger pool of older Class B and C space that brokers privately describe as functionally unleasable at current rents.

The result is a market that looks healthier on the trophy end than aggregate vacancy would suggest. In Midtown Manhattan, asking rents in the recently delivered towers around Hudson Yards and along Park Avenue have held in the $120 to $200 per square foot range for the best blocks, while older Sixth Avenue inventory routinely trades at meaningful concessions and free-rent packages exceeding a year on ten-year terms. Toronto's Bay Street corridor follows the same pattern in Canadian dollars, with newly built towers like The Well and CIBC Square commanding premiums over comparable space two blocks away.

What the vacancy data actually shows

JLL and Colliers both publish quarterly reports that break occupancy out by building age and class, and the gap has only widened. Buildings delivered after 2015 are running sublease availability roughly half that of pre-2000 stock in both cities. Tenants are using lease expirations to consolidate footprints by 10 to 30%, then redeploying the savings into higher-quality space with better ventilation, more natural light and amenity floors that can substitute for an office their staff would otherwise skip.

“The bifurcation between best-in-class and commodity office space is not a cycle. It is a structural reset.”

The conversion math

Both cities have leaned on office-to-residential conversion as a partial answer to obsolete inventory. New York City's Office Conversion Accelerator, paired with the 467-m tax incentive in state law, has produced a pipeline that the city's Department of City Planning estimates could yield around 20,000 housing units over the next decade. Toronto's draft Official Plan amendments allow residential as-of-right in much of the Financial District, and the city has approved a handful of full-tower conversions on Bay Street and University Avenue.

The constraint is not zoning so much as floor-plate geometry. The Urban Land Institute and the New York City Comptroller have both flagged that towers built between roughly 1960 and 1990 often have deep floor plates and limited window-line, which makes residential conversion expensive once light and air requirements are factored in. Conversions tend to pencil only when the office acquisition price is roughly 30 to 50% below replacement cost, which is one reason transaction volume has been slow even as headline vacancy stays elevated.

What investors are actually buying

Direct office acquisitions remain thin in both cities, but capital is rotating into adjacent property types that the same buyers used to consider niche. Industrial outdoor storage, last-mile logistics around the GTA's 400-series highways and the New York metro's Meadowlands, life-sciences lab space in Cambridge and the MaRS Discovery District, and purpose-built rental apartments have absorbed the bulk of institutional flows over the past two years, according to MSCI Real Capital Analytics figures referenced in CBRE's research notes.

For retail investors, the cleanest exposure remains diversified REITs with disclosed tenant rosters and clear lease-expiry schedules. The closed-end office REITs that traded at deep discounts to net asset value through 2024 have narrowed those discounts, but they remain a leveraged bet on the upper tier of the office stack rather than a bet on office as a category. Property tax rules, planning approvals and incentive programs differ materially between New York State and Ontario; verify current terms with municipal and provincial sources before underwriting any specific asset.