Toronto was the only Canadian market among 20 cities in North America to make the next cut for Amazon’s HQ2, but the Seattle-based company would face a tight market if it ultimately chooses the country’s largest metropolis for its second headquarters, say industry watchers.

“There is no space, so somebody will be building them a building,” said Paul Finkbeiner, chief executive of GWL Realty Advisors, which has 19 million square feet in office space and is one of the country’s major landlords.

He says there are landlords out there that can build Amazon space in the urban core, but Finkbeiner questions if that is what the web giant will want.

“There are probably two or three landlords that have space, but they will want to build a traditional building and Amazon probably doesn’t want a traditional building,” said Finkbeiner.

The port lands about five kilometres southeast of the city continue to get mentioned as the ideal location for an Amazon move to Toronto, with First Gulf’s 60-acre site at the old Unilever factory regularly touted. Once complete, First Gulf says there will be 12 million square feet of development able to accommodate 50,000 workers.

Colliers International noted in the third quarter that the vacancy in the city’s core for AAA space was 3.9%, dropping from 5.2% a quarter earlier, as the office market has tightened up. There are more opportunities in the suburbs where Colliers says the vacancy rate was 8.6% in the third quarter, but the expectation is Amazon would stay near the core.

“What it could do is shift the downtown. They don’t want to be blue suits (at Amazon),” said Finkbeiner. “You could get into districts and Amazon could create its own funky town and suck some of the people from the downtown.”

Benjamin Tal, deputy chief economist with CIBC World Markets, said there is a lot of “905 moving to 416,” referring to the area codes that reflect the suburbs and city of Toronto, respectively. He doesn’t expect Amazon to focus on the suburbs either.

“If there is an issue for the office sector, it’s 905 because they are older buildings and they don’t fit the newer environmental codes,” said Tal. “Young people want to live downtown.”

The economist says if Amazon moves into the downtown core, it could have a profound effect on the office and housing markets. “We could see vacancy rates going to zero,” said Tal, referring to the residential rental market.

The Toronto Real Estate Board says the average detached home in Toronto sold for $1,420,046 in 2017, up from $1,003,645 a year earlier, and 50,000 workers coming to the city could put more pressure on both the office and housing market. Research firm Urbanation Inc. said average rents in the city of Toronto climbed 9.1% year over year and reached $2,166 per month in the fourth quarter.

“Rents will rise, and we will see more money going into the city,” said Tal, who says he’ll be “surprised” if Toronto wins.

Craig Hennigar, direct of market intelligence for Canada at Colliers, thinks Toronto might have an advantage over its 19 American competitors because of the city’s ability to attract workers.

“The challenge is Amazon is going to have to import half of these employees,” said Hennigar. “It’s a sovereign issue, whether or not they leave the U.S. In Canada, they can bring people in and we’ve seen that in Vancouver again and again where tech firms will set up a satellite office here because it’s easier for them.”

Hennigar said before 2000, Microsoft built “a ton of space” in the Vancouver suburb of Richmond to accommodate new employees. “Suddenly it became easier to bring people into the States, and all that business went away.”

Toronto wasn’t worried about any of that after beating out other Canadian cities like Calgary and Vancouver in making the shortlist. “This is good news for our city, it’s good news for the region, it’s good news for the province, and I think it’s great news for Canada,” said John Tory, mayor of the city, at a press conference. “We are on this list without offering any tax breaks or financial investments.”

Dean Newman, a principal and broker of record with Cresa Toronto, which represents tenants, said there isn’t supply in the Greater Toronto Area to accommodate Amazon in one building, but there are towers they could lease as part of a first entry to the market.

“Amazon (moving) would continue to spur the building boom we are seeing. There is still more development capability and buildings to be built,” said Newman. “It’s great because the new product just rejuvenates the city.”