There has been no end to the theories explaining the conspicuous absence of new office towers in downtown Toronto throughout the 1990s and well into the new century.

New technology was a favourite culprit after the collapse of the commercial real estate market in 1989. People can now work anywhere, it was said.

When technology strengthened the power of the world’s leading financial centres, blame for Toronto’s laggardly performance shifted to local factors — high taxes and suburban competition. Local papers recently warned that the anti-business policies of Mayor David Miller and his left-leaning council would result in Calgary overtaking Toronto as a preferred head office location.

Fortunately for Toronto, the market is deaf to such concerns. Even as the Toronto Office Coalition grumbled about Calgary, developers were lining up at Toronto City Hall with proposals for half a dozen new towers — four million square feet of new office space — in the heart of the financial district.

The turnaround first became visible when Brookfield Properties Corp. demolished the unfinished elevator shaft that had long adorned a prime Bay Street address — a locally notorious monument to 1980s overreaching. Next to where it was, a 50-storey, 1.1-million-sq.-ft. office tower is emerging, with KPMG LLP booked as lead tenant.

Concerns about the loyalty of the Big Five banks were allayed when Royal Bank of Canada agreed to put its name on a 43-storey, 1.2-million-sq.-ft. tower that Cadillac Fairview Corp. Ltd. is building on Wellington Street. Among other projects, Menkes Developments Ltd. is building a $250-million, 30-storey tower beside the Air Canada Centre to house the local operations of Vancouver-based Telus Corp.

“The market is relatively tight, and we expect it to get tighter over the next two years,” says Raymond Wong, research director for real estate company CB Richard Ellis Ltd. Pent-up demand, newly consolidated ownership in the development industry and growth of business services will keep builders busy for at least two years, he adds. But even with 3.3 million square feet coming onto the market in 2009, he predicts, financial district vacancy rates probably won’t go higher than 11%.

One statistic in Richard Ellis’ 2007 Canadian market outlook particularly pleases city officials: of the 5.7 million square feet of office space under construction in the Greater Toronto Area in the fourth quarter of 2006, 3.4 million square feet is in the downtown financial district — a healthy 60% of the pie. Five years ago, officials say, downtown’s share was 10%, at best.

“That’s a significant turnaround,” says Peter Viducis, the city’s manager of economic research. “It shows there is still serious good value to being downtown.”

The financial district is the most accessible place in Canada, bar none, Viducis says: “It’s the place you can gather more people to work at once than anywhere else.” And RBC’s decision to lease another 400,000 square feet is “a strong vote of confidence” that belies the bad-news bears, he adds.

But the bad-news bears are still here. Good news gives Janet Ecker, the former Ontario Conservative cabinet minister who heads the Toronto Financial Services Alliance advocacy group, the jitters. “The concern is about global competition,” she says. “We have strengths, but we have a lot more to do.”

But it wouldn’t be Toronto if the city wasn’t constantly striving. IE