Oxford, EY sign downtown Toronto’s largest office lease of 2024

Oxford Properties has signed what it calls the largest office lease this year in Toronto’s downtown core, with EY Canada at the tenant’s namesake building.

The lease at EY Tower at 100 Adelaide St. W. sees the assurance, consulting, tax, strategy and transaction services provider remain in its existing space and add an additional 50,000 square feet in a long-term renewal. It brings EY’s total footprint at the 900,000-square-foot building to over 300,000 square feet.

This maintains EY Tower at 100 per cent occupancy, significantly outperforming the downtown Toronto office market, which had a vacancy rate of 13.5 per cent in the third quarter.

“We’ve been good partners with EY, dating back to 2012 or 2013, to launch this project and deliver their workplace of the future,” Oxford vice-president and head of eastern Canada office Kevin Hardy told RENX in an exclusive interview. “And then, through the pandemic, there were lots of conversations with EY about what their needs were.”

EY Tower was already fully leased when EY expressed its need for the additional 50,000 square feet, so Oxford negotiated a termination deal with an existing large institutional tenant that had space elsewhere. While that wasn’t in an Oxford-owned building, Hardy said the company has space in other Oxford buildings around the globe.

What EY Tower offers

EY Tower was originally a 16-storey Art Deco commercial building dating back to the 1920s. Oxford completed the redevelopment of the site in 2017, transforming it into a modern 40-storey LEED Platinum- and WELL-certified tower that integrates the historic structure.

EY Tower is in Toronto’s Financial District and within easy walking distance of two subway stations. It provides direct access to the underground pedestrian PATH network, dining, shopping and entertainment.

“Coming out of 2022, EY found they were starting to leverage their office space a lot more to drive culture, collaboration and efficiencies,” Hardy said, noting EY Tower satisfies those needs.

The building offers: 591 underground parking stalls along with electric vehicle charging stations and a car wash; bicycle storage and shower facilities; a fitness/wellness centre with programming and classes; a daycare centre; collaborative workspaces; conference facilities; event space; efficient floor plates; outdoor space; and abundant natural light

EY Tower is also home to several other firms, including the head offices of Oxford, OMERS and the Toronto Stock Exchange.

Oxford and its office portfolio

Oxford was established in 1960 and has become a global real estate company by investing in properties, portfolios, development sites, debt, securities and real estate businesses. The OMERS-owned firm and its portfolio companies manage approximately $84 billion of assets. 

Oxford’s owned portfolio encompasses office, logistics, retail, multifamily, life sciences, hotels, alternatives and credit. It also has more than 70 development projects underway globally, across all major asset classes.

Oxford’s Canadian office portfolio is benefitting from the bifurcation of the office market and the ensuing flight to quality. The company significantly outperforms the market in its three Canadian markets of: 

• Toronto, with 95 per cent committed occupancy versus a 13.5 per cent Q3 downtown vacancy rate;
• Vancouver, with 96 per cent committed occupancy versus an 11.9 per cent Q3 downtown vacancy rate;
• and Calgary, with 93 per cent committed occupancy versus a 28.2 per cent Q3 downtown vacancy rate.

Office leasing success

Inquiries and tours across the portfolio are strong and almost back to pre-COVID-19 pandemic levels, and rents have been maintained, according to Hardy.

“Our customers not only value the quality of the space we deliver, but the quality of the service and the quality of the communities that we provide to them. I think that’s helping our retention level and the demand pipeline to stay high.”

Oxford is focused on “changing our service model from a reactive customer service approach to a hospitality-focused customer service mindset. We want to be more proactive, more relational and less transactional.”

Hardy said Oxford is pre-building suites for vacant spaces of 5,000 square feet and below, so it’s spending money on those instead of offering major incentives in lease transactions.

“We’re not ignorant to the fact that some B-class assets would probably be offering substantially different financial terms,” Hardy explained, “but that’s a different market and a different quality of space.

“If customers want that as their solution, that’s perfectly fine, and there are going to be customers for that. But we haven’t felt the need to compete with that or been driven to it.”

Most of the good sublet space in Toronto’s downtown core office buildings has been scooped up, according to Hardy, who said Oxford’s portfolio in particular has had “pretty minimal” sublet activity.

Available space and potential development

Hardy said Oxford’s biggest block of vacant office space is at 111 Richmond St., a 70-year-old, 16-storey building that’s part of Richmond-Adelaide Centre. It has 58,453 square feet of available space, according to its web page, but Hardy said there are prospective tenants targeting all of it.

Oxford has no other major office lease expiries until 2027 and 2028. Hardy said the portfolio is so healthy the company is contemplating marketing its The HUB site at 30 Bay St. for lease-up.

The property was purchased in 2017 for $96 million by Oxford and the Canada Pension Plan Investment Board, on a 50/50 basis.

A proposal for a 57-storey tower with 1.33 million square feet of office and retail space, 270 underground parking spaces and a connection to the PATH network was submitted to the City of Toronto in August 2020, but there’s been no development activity due to the subsequent downturn in the office market.

“We don’t have any doubt that the type of space a new building would provide would be in demand, but whether the economics of today’s market could afford the construction cost is a different question,” Hardy said.