Vacancy in Toronto’s red-hot downtown fringe office market dropped to 2.8% last quarter, a 25-year low. Cushman & Wakefield’s Stuart Barron digs into what’s driving the growth.

Stuart, Cushman’s national research director, tells us TO fringe office—a 37M SF market that encompasses brick-and-beam properties in downtown east and west, and new towers in the north and south core—is a hive of deal activity these days. Spin Master is relocating into 80k SF at 225 King St W, and Konrad Group will be moving into 30k SF at 469 King St W—both firms more than doubling their footprints. In the south fringe, ecobee is consolidating into 37k SF at 207 Queens Quay W; Thomson Reuters has subleased 49k SF at 120 Bremner Blvd; and One Eleven is tripling in size at 325 Front St W.

Downtown will have 13.2M SF of new product come on stream between 2009 and 2020, and 76% of that is hitting fringe markets, Stuart says. “A big part of this is a new-development story.” Office projects such as 18 and 25 York St and 134 Peter St / QRC West (above) have met with strong demand due in large part to their proximity to transit hubs like Union Station, and to the deep Millennial talent pool residing in downtown condos. The same factors are fuelling a mass migration of tenants from suburban and midtown markets, according to Stuart. “It’s tremendously easy to access talent downtown.”

Newer market entrants like Amazon, LinkedIn and Google—firms that might have located in GTA West or East in years gone by—have set up shop in the downtown fringe. Same with tenants such as Entertainment One (QRC West), Shopify (King-Portland Centre) and the Globe and Mail (351 King St E, above)—all opted for fringe. Downtown has had 2M SF of migrating tenants or new entrants since 2009, with 325k SF of absorption per quarter over the past two years, 250k SF of it in the fringe. “Seems every time a new tower rises,” Stuart says, “companies grow to meet the space coming to market.”