Toronto office tower goes up for sale in sign of market thaw
Dream REIT has hired CBRE Group and TD to market 438 University Ave.
A Canadian landlord is sounding out potential buyers for a downtown Toronto office tower, testing a market that’s been largely frozen since interest rates started shooting up nearly two years ago.
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Dream Office Real Estate Investment Trust has hired CBRE Group Inc. and Toronto to market 438 University Ave., according to marketing documents. The company also remains open to offers for another building at 655 Bay St., which was put up for sale more than a year ago.
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Representatives for Dream and TD didn’t respond to requests for comment. A CBRE spokesperson declined to comment.
Shares of Toronto-based Dream and other publicly traded office owners have been hammered with the rise of remote work. And since interest rates started climbing in 2022, building transactions have been rare, leaving questions about what the properties are actually worth. With the Bank of Canada indicating this week that it’s done raising interest rates, buyers and sellers may now have enough clarity to come to some agreement on price.
While several buyers have emerged recently looking for deals among cheaper suburban office buildings, Dream became one of the first to test investor appetites downtown this month, announcing the sale of 720 Bay St. for $135 million. That building and the other two it’s seeking to sell are located just outside the financial core, in a downtown market where office vacancies have climbed to a record 17.4 per cent, according to CBRE.
With many companies now making remote or hybrid work arrangements permanent, long-term prospects for office demand are uncertain. Many buildings are unsuitable for conversion to other uses such as housing, and tenants that are signing new leases are favouring newer, amenity-rich properties, according to CBRE.
Toronto’s vacancy increase last quarter was driven by a flood of newly built space coming online from large projects begun before the pandemic, the brokerage said in a report earlier this month.
Dream’s University Avenue tower, built in 1991, is 93 per cent leased, with the provincial infrastructure agency as its biggest tenant, according to the sales documents.
Bloomberg.com
