THE “RIGHT SPACE” HARD TO FIND IN THE GREATER TORONTO AREA
The Greater Toronto Area Industrial Real Estate Market availability rate continues to be among the lowest in North America.
This low vacancy rate triggered a considerable increase in net rental rates on existing product, as well as net rental rates on new speculative and design build projects.
Demand for Warehousing and Distribution is great, and we have seen most of the activity in this sector.
The Forzani Group (Canadian Tire) preleased 1.2 million sf in Brampton, DHL leased 550,000 sf in the old SEARS building at 9501 Hwy 50 in Vaughan, and the TTC preleased 550,000 sf in North York, as part of the redevelopment of the old Home Depot distribution centre.
Sobey’s, WalMart and Olympia Tile also either secured a brand new lease or extended their current leases.
Food companies are very active, with The Kraft Heinz Co, Gay Lea Foods and Gordon Food Service announcing expansions and/or secured new locations.
Users looking to acquire properties were paying, in some cases, in excess of $200 per sf or $1,500,000 per acre for serviced land.
The GTA Industrial Investment Market is experiencing very low supply and great demand from private and institutional buyers. CAP rates are between 4.5% – 5.0%.
SOME KEY STATISTICS TO TAKE NOTE OF
Vacancy Rates 2.1%
Avg Asking Net Rental Rates $7.20 psf
Absorption 9.4 Million sf
Under Construction 5.2 Million sf
CAP Rates 4.5 – 5.0 %
1. RECORD LOW VACANCY RATES
- The Greater Toronto Area Industrial Market vacancy rate sits at 2.1 % of overall inventory, with 0.2% available for sale, and 9.4 million square feet of leasing activity.
2. STRONG DEMAND FROM WAREHOUSING & FOOD SECTORS
- There is strong demand for industrial buildings, specifically in the warehousing & distribution sector, as well as in food manufacturing. This has led to the record low level of vacancy rates, increase in net rental rates, and sale valuations.
3. LARGE BLOCKS OF SPACE ARE BEING PRELEASED
- The former Eaton’s Distribution and Home Depot warehouse building located at 2233 Sheppard Avenue West - 1,150,000 sf on 54 Acres - is being replaced with 1,100,000 sf of new high-bay space in three buildings, with the TTC pre-leasing 550,000 sf.
Other large lease transactions include Sobey’s pre-leasing 383,000 sf at 100 Gibraltar Road in Vaughan, DHL leasing 555,000 sf at 9501 Hwy 50 in Vaughan, and Olympia Tile renewing an existing lease of 844,000 sf at 100 Royal Group Crescent in Vaughan.
NOTABLE LEASE TRANSACTIONS:
100 Gibraltar Rd, Vaughan 383,194 SF New Sobey’s
10254 Hurontario St, Brampton 1,200,000 SF New Canadian Tire
233 Madill Blvd, Miss 446,160 SF New Wallmart Fulfillment
100 Royal Group Cres, Vaughan 844,069 SF Renewal Olympia Tile
9501 Hwy 50, Vaughan 555,105 SF New DHL
1395 Tapscott Rd 373,000 SF New The Hillman Group
2233 Sheppard Ave W 550,000 SF New TTC
NOTABLE SALE TRANSACTIONS:
100 Pippin Rd, Vaughan Franline Inv 113,314 SF $182 PSF
361 Connie Cres, Vaughan Private Inv 51,664 SF $207 PSF
2601 Fourteenth Ave, Markham Summit 232,454 SF $170 PSF
350 Hazelhurst Rd, Miss BMO 220,000 SF $135 PSF
4455 North Service Road, Burl Summit 246,950 SF $114 PSF/5.8% CAP
We have seen an increase in net rental rates on large blocks of space.
Lease rates are now starting at $7.25 net per sf and higher, while smaller blocks are leasing at more than $8.00 per sf net.
For companies that don’t have time to wait at least 18 to 24 months to design and construct a new building, the only option is to consider one of the speculative construction opportunities.
A good number of lease and/or sale transactions are completed “off the market.”
That being said, make sure that you engage with a broker that has years of experience in local markets, and good relationships with investors and occupiers, so that you don’t miss any opportunities.
Goran Brelih and his team have been servicing Investors and Occupiers of Industrial properties in Toronto Central and Toronto North markets for the past 25 years.
For more information on GTA Industrial Real Estate Market or to discuss how they can assist you with your real estate needs please contact Goran at 416-756-5456 or email at firstname.lastname@example.org
THE GTA INDUSTRIAL MARKET IS FIRING ON ALL CYLINDERS
The Greater Toronto Area Industrial Market rates are at the lowest level ever, currently at about 1.7%, among lowest in North America.
This environment coupled with escalating land values triggered increase in net rental rates across the board, with average net rental rates above $7.00 per SF. Recent lease transactions on larger warehouse / distribution centres are now starting at low to mid and high $7.00 per SF and averaging about $8.00 per SF over the term of the lease.
Supply of new buildings is driven by needs in the warehouse and distribution sector, and can barely keep up with the demand. About 4.9 million SF is under construction at the moment, which represents less than 0.5% of the overall inventory.
Most of the new construction is in Toronto North and Toronto West Markets (Milton and Vaughan) while some investors and occupiers are exploring the land market in Durham Region (Pickering, Ajax, Whitby and beyond).
A few redevelopment projects are under way in Toronto Central Markets as well, North York with 1.1 M SF (550,000 SF preleased), Scarborough Central with 295,000 SF and Metro East Business Park with 1.5 M SF (373,000 SF preleased).
Both private and institutional investors are looking to increase their industrial portfolios and are willing to acquire properties at low CAP rates. Long term holders are securing financing below current CAP rates, creating positive leverage, while value add buyers are counting on appreciation as well as an increase in net rental rates.
CAP rates are mainly between 4.5% and 5.5%, however, depending on the product we see them even below 4% or above 6%.
KEY TAKE AWAYS:
- VACANCY RATES 1.7%
- AVERAGE ASKING NET RENTAL RATES $7.04 PSF
- ABSORPTION 6.5 M SF
- UNDER CONSTRUCTION 4.9 M SF
- CAP RATES 4.5-5.5%
NOTABLE LEASE TRANSACTIONS:
- 2233 Sheppard Ave West, North York 550,000 SF New TTC
- 1395 Tapscott Road, Scarborough 382,500 SF New Hillman
- 2020 Logistics Drive, Mississauga 770,000 SF New Mayfair
NOTABLE SALE TRANSACTIONS:
- American Business Park, Mississauga KingSett 553,000 SF $164 PSF
- 210 Great Gulf Drive, Vaughan Mantella 128,000 SF $140 PSF
- 1880 Matheson Blvd East, Mississauga Cosa Nova 389,000 SF $161 PSF