This Is What You Need To Know….
The narrative continues… It’s more of the same: hot markets, low vacancies, rising rental rates, and average prices, as you’ll see below.
Bottom line: it’s incredibly difficult to find product – not just GREAT product – but ANY product that fits your investment criteria, risk profile, or ideal timelines (nevermind the competition, bully offers, or off-market deals beating you to it).
In order to combat this, there are a handful of strategies that investors can leverage for value-add plays (listed later on in this article), which will allow them to jump in at an opportune moment while also banking on upside in the future.
The market may be tight, but this doesn’t mean you can’t capitalize on the phenomenal lift in rents and values across the entire Greater Toronto Area.
The process that exists to both investors and sellers will allow you to do just that.
But that topic is for another day, at another time.
Right now, let’s start by looking at the…
Toronto North Markets 2018 Industrial Sales Market Overview
The Toronto North Industrial Markets (Vaughan, Markham, Richmond Hill, Aurora and Newmarket) were on fire in 2018, resulting in a total sales volume of more than $531 million, with 48 properties larger than 20,000 SF sold for a total of 3,328,190 SF, and at an average price of $159.23 PSF.
Summary of the Toronto North 2018 Industrial Sales Transactions
(Properties larger than 20,000 SF)
Sales were evenly distributed across the city, however, Vaughan had the most sales (1,256,675 million SF in 23 buildings), the highest sales volume ($222,633,000) and the highest average price PSF ($188.04).
Summary of Toronto North Markets 2018 Industrial Investment Sales Transactions
Investors showed great interest in single-tenant as well as multi-tenant buildings due to significant potential for a “value add” play.
Value Add Opportunities for Investors – Single-Tenant Building:
- Resale to a user upon Lease expiry at a higher value than income value/CAP rate value
- Redevelopment upon Lease expiry
- Increase net rental rate on Lease renewal
- Surplus Land available for development
Value Add Opportunities for Investors – Multi-Tenant Building:
- Increase net rental rates on lease renewals
- Conversion to industrial condominiums
- Surplus Land available for development
We finished 2018 with 48 transactions – 19 were user sales, while 29 were investment sales with CAP rates ranging from 3.1 % to 5.4 % with an average CAP rate of 4.22 %.
Two multi-tenant portfolios achieved cap rates at the beginning of the year at 3.1% & 3.4%, and a single-tenant industrial building sold at a 5.4% cap rate, while most other transactions happened around the 4.5% mark.
It was very difficult to buy industrial property in the Toronto-North markets in 2018 with vacancy rates for purchase in the last quarter being as low as 0.1%. It is important to understand that many transactions these days happen “off the market”.
Street level brokers that are in constant contact with investors and occupiers usually have information about opportunities before they are available to the market in general. Please keep in touch!
For a confidential consultation or for a complimentary opinion of value of your property, please give us a call.
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.
Goran Brelih is a Senior Vice President for Cushman & Wakefield ULC in the Greater Toronto Area.
Over the past 27 years, he has been involved in the lease or sale of approximately 25.7 million square feet of industrial space, valued in excess of $1.6 billion dollars while averaging between 40 and 50 transactions per year and achieving the highest level of sales, from the President’s Round Table to Top Ten in GTA and the National Top Ten.
Goran is currently serving as President of the SIOR ‐ Society of Industrial and Office Realtors, Central Canadian Chapter and on the Board of Directors of Muki Baum Accessibility Centre, a Toronto‐based NGO which provides support to children and adults with complex disabilities.
Industrial Real Estate Sales and Leasing, Investment Sales, Design Build and Land Development
About Cushman & Wakefield ULC.
Cushman & Wakefield is a leading global real estate services firm that delivers exceptional value by putting ideas into action for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with 48,000 employees in approximately 400 offices and 70 countries. In 2017, the firm had revenue of $6.9 billion across core services of property, facilities and project management, leasing, capital markets, advisory, and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.
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, email at firstname.lastname@example.org, or visit www.goranbrelih.com.