Toronto's office market took a big breather in Q1 following a furious finale to 2014, particularly downtown, where deal velocity and building deliveries slowed and new supply drove the availability rate higher into double digits. “We’re heading for a bit of a bumpy ride,” Avison Young principal Craig Tresham tells us.

Markets, like people, suffer fatigue on occasion, Craig points out, so he isn’t fretting long-term. That said, he thinks owners of downtown AAA buildings/bank towers “should be getting a little nervous” about the widening gulf between the vacancy rate (4.7% in Q1) and availability rate, which has climbed steadily during the current development cycle and hit 14.2% last quarter. “I can’t remember that spread being almost 10%,” says Craig, noting the market’s in a “head-scratching phase” as it looks to backfill a “multitude” of looming vacancies. “People are wondering, where is that demand going to come from?”

New supply deliveries slowed last quarter, with four buildings bringing 334k SF. Supply now outpaces demand by three to one, Avison Young notes, and an array of new towers have been drawing tenants out of older AAA buildings. (Deloitte's moving into Bay Adelaide East, for example; and Ernst & Young and the OMERS family are heading to 100 Adelaide W, above). Still, while Craig says owners of older building stock are well aware of looming availabilities, and some have started to "chip away" at it, "there hasn’t been major backfill so far.”

Landlords were spoiled “having done nothing but increasingly better deals the last several years,” notes Craig, seen at centre with his proudly Canadian Avison Young team. Now things are shifting to a tenants' market, though, and rents are poised to drop. Few could have predicted this at the outset of 2014, Craig says, so the lack of Q1 activity this year could be attributed to owners “recognizing where we sit statistically” and rewriting pro formas on assets to account for negative rent growth. “Nobody does that until they have to, and now I think they have to.”