How Dream Avoided A Nightmare On Airport Road
Things were looking grim for Toronto's Airport Road node, with departures by Winners and Sobeys pushing vacancy sky-high. If new deals weren’t done soon, Dream leasing VP John Shields tells us, “it risked becoming a bloodbath.”
Here’s John at Airway Centre IV (5935 Airport Rd), which Dream spruced up in a bid to lure suitors. Tech firm ConceptWave left the complex after being acquired by Ericsson, and Air Canada vacated space there to move to a new custom-built ops centre in Brampton. But that didn’t hurt nearly as much as Winners upping stakes last year for a 350k SF build-to-suit facility, leaving three Dream buildings (6715, 6695 and 6725 Airport Rd) behind; followed by Sobeys decamping Canderel’s 6355 Viscount Rd for its own custom-built digs at 4980 Tahoe Blvd. “From the landlord’s perspective," says John, "it was a perfect storm of things going the wrong way."
Vacancy in the Airport Road node “shot up outrageously,” hitting the mid-20s, with the potential to go “considerably higher,” says John. And market-watchers started to talk. “The sentiment was that everyone is vacating this node, which created headwinds.” But over the past 18 months Dream has done much to stem the bleeding from its 1.2M SF airport area portfolio, carrying out 67 transactions in that time, many new or expansion deals. At Airway Centre (seen above) DB Schenker has taken 45k SF, Cima Engineering signed on for 25k SF, CBRE inked a deal for a new west-end office (17k SF), and Yardi Systems is expanding into 44k SF.
Elsewhere in the node, Canderel has leased the entire Sobeys space (90k SF) at 6355 Viscount Rd (above) to McKesson Canada, and the Technical Standards & Safety Authority (TSSA) took 53k SF at Bentall Kennedy’s 345 Carlingview Dr (below), which had been vacated by SNC-Lavalin in another large-scale departure. All told, airport node landlords have leased closed to 350k SF in the past 18 months, according to John. That hasn’t brought vacancy in the area down dramatically, he says, “but we’ve eliminated what looked like it might be an additional wave of vacancy and put a dent in the existing vacancy.”
John's eager to stress that the aging Airport Road node is still desirable, not the victim of flight to quality. “Bad news travels quickly,” he says, and though folks were well aware of high-profile departures there, they’ve not been as aware of recent successes. John notes Winners left for a larger custom-built facility, not because it'd soured on the area. And Air Canada moved to a bigger purpose-built space, too, but kept its Vacations group and Jazz Airlines at Airway Centre. “It wasn’t like they said we’re out of here, this isn’t working for us.” And PS, says John: new spec buildings at rival Airport Corporate Centre still have lots of leasing to do. “They haven't attracted tenants from our portfolio.”
The situation out at the airport may not be as bad as people think, but John acknowledges Dream nevertheless faces a challenge in ensuring older assets in its portfolio continue to be “workspaces tenants are looking for.” As an example of its efforts in action, John points to CBRE’s new home at Airway Centre IV, being built to meet the health-and-wellness-focused WELL Building Standard (part of a nationwide office revamp strategy for CBRE; its slick new Vancouver office is seen above). “Our goal is to continue refreshing our properties, cosmetically as well as operationally,” says John. “But we want people to realize there’s still vitality in this node.”