Focus on proactive leasing, premium amenities, and zero carbon upgrades
Located in the heart of Toronto’s Financial Core, Scotia Plaza is a landmark Class AAA office complex comprised of 2.2 million square feet across three office buildings and concourse retail. Since acquiring an interest in the building in 2016, we have focused on creating a best-in-class tenant experience, investing in a significant capital investment program that includes zero carbon conversion, elevator modernization, food court renovations and lobby and tenant amenity additions. This has driven strong tenant demand and occupancy during ownership.
With the renewal and downsizing of Scotiabank in 2022 and the known expiry of Cassels Brock in 2024, we were faced with the challenge of releasing 452,000 square feet of space in challenging market conditions, notably evolving remote work policies and new supply coming into the market. The team responded to these challenges by being proactive, creative and flexible. 24 months later, the team has led the market completing 460,000 square feet of leasing through 19 separate deals at rates ahead of expiry. In Q4 alone, 120,000 square feet of leasing was completed.
Scotia Plaza is now 95.9% committed, outperforming the wider Toronto Downtown office market vacancy of 17.8% and the AAA competitive set where vacancy is 7.1%. There are no remaining meaningful known vacancies on the horizon. The leasing velocity and strong occupancy reflect the ongoing trend of tenants upgrading and focusing on core, quality, transit-oriented locations and building amenities and our hands-on active management approach.
Both 40 King and 100 Yonge have been Zero Carbon Performance certified, supporting our leasing program and reducing operating costs for our tenants. We also continue to invest in the amenitization of the building and are in the process of building a unique tenant amenity space on the top floor of 40 King. Managed by Oliver & Bonacini, the north portion of the floor will be a fee-generating large format conference and event space that services both corporate functions during the day as well as social events in the evening and on weekends. The south half of the floor will be an amenity space for the exclusive use of Scotia Plaza tenants. It will include a tenant lounge that can be used for remote work, meetings and social events as well as a coffee, pastry and cocktail service from a planned bar area. Upon stabilization, we expect this combined amenity space to earn income in line with current market rents for the space.
We have come through this period of elevated leasing, establishing a strong tenant profile for the building, with leases that have market net rents and net effective rents that are ahead of the expiring rents. Overall, we have created $50 million ($19 million at CREIF’s share) of value through cash flow improvements in our appraisals.
Looking ahead, with 197,000 square feet of completed leasing commencing in 2026, we will see strong income growth and have budgeted a 50% increase in FFO for Scotia Plaza.
Scotia Plaza is a cornerstone of the KingSett Canadian Real Estate Income Fund (“CREIF”) portfolio and represents the Fund’s investment and operating strategy of owning and executing best-in-class, irreplaceable, core real estate in Canada.
