An Amazon sign in front of 120 Bremner Blvd. in downtown Toronto, on Dec. 9, 2020.Fred Lum/The Globe and Mail
Amazon.com Inc. has signed new leases in downtown Toronto just months after e-commerce rival Shopify Inc. quietly expanded its own postpandemic floor space in the core, even as major corporate tenants retreat amid the novel coronavirus.
The Seattle-based e-commerce and cloud services company has taken an additional 100,000 square feet in two buildings in the south part of Toronto’s financial district.
The Amazon leases are rare high-profile deals brokered during the health crisis, which has forced office employees to work from home, triggered scores of companies to put space on the sublet market and raised questions about the future of offices themselves.
Amazon confirmed Wednesday it is taking new space in office buildings in which it already has leases: three new floors at 18 York St. and two new floors at 120 Bremner Blvd. Spokesperson Kristin Gable said the company plans to occupy the new spaces in 2022.
It comes after Shopify, whose chief executive recently declared the end of “office centricity,” agreed to lease more space at its new building in Toronto. In June, Shopify exercised its option to take an additional 90,000 square feet of space at the Well, a huge new development, bringing its total to 340,000 square feet, according to Michael Emory, CEO one of one of the developers, Allied REIT.
The pandemic has prompted investors to bid up the share prices of Amazon and Shopify, which have been hiring to accommodate the growth in e-commerce. The convenience of home delivery and the dominance of Amazon’s cloud computing services has helped push its market capitalization up by more than 70 per cent since March to almost US$1.6-trillion. Shopify shares more than doubled as small businesses signed up for its e-commerce offerings in droves, making it Canada’s most valuable public company, worth $162-billion.
Amazon said in late September it would add 3,500 new employees in Canada in the coming years, including 500 jobs in Toronto, to be based across five floors at 18 York. Amazon declined to say Wednesday whether the new space would accommodate additional employees beyond the 500 already announced, or whether it would shed office space in other buildings as a result.
Amazon’s real estate expansion is one of the few bullish moves from Toronto office tenants. Established companies such as PricewaterhouseCoopers, Cisco Systems Inc., Oracle Corp., Air Canada and PC Financial have put some of their space on the sublet market. Other companies around the world, such as Deutsche Bank, have announced plans to slash their office space.
In downtown Toronto, which has had the lowest office vacancy rate in North America for four years, the amount of space available to sublet is rising. Over the first nine months of this year, sublet space has more than tripled in the core and it has nearly quintupled in downtown Vancouver, according to data from commercial real estate company CBRE.
That has increased both cities’ office vacancy rates to nearly 5 per cent, the highest level in several years, according to CBRE. (Space available to sublet is counted as vacant.)
Vacancies are rising as several mega office towers are getting ready to open and developers continue to push new office projects, including east of the financial core and close to the city’s international airport.
This year, 26 office towers were under construction in downtown Toronto, including four skyscrapers with more than a million square feet of space. In Vancouver, 13 office properties were under construction, according to the most recent data from CBRE.
Although office landlords are getting new leases, there is concern over what types of tenants will use the space if major tenants such as the big Canadian banks consolidate their offices or take less room when their leases are up for renewal. So far, the two tech giants are taking up space.
In one Toronto tower, Amazon will be using space that PwC had been trying to unload.
QuadReal, which owns 18 York and 120 Bremner, and other landlords have been offering brokers incentives to drum up new leases. QuadReal, a real estate company owned by B.C. Investment Management Corp., declined to comment.
Amazon also has another long-term lease at QuadReal’s large two-tower office complex in downtown Vancouver.
Though Shopify announced a “digital-by-default” policy in May, saying that it will no longer require employees to be tethered to an office even after the pandemic, the company has said it would keep hubs in major cities for meetings, recruiting and other functions.
Shopify did not respond to a request for comment before publication Wednesday evening.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.