January 12th, 2024

Time seems to have compressed ever since we came out of the pandemic.

Maybe it was simply a catalyst for change. Or perhaps we were all making up for lost time.

Or within the context of industrial real estate, the emergence of e-commerce and the resulting demand for warehousing and logistics facilities emphasized the need and signalled the profitability surrounding Bix Box space.

Whatever the reason may be, broad economic forces, regional drivers, and industrial real estate dynamics have been in constant flux. The rise of interest rates from all-time lows. The scale of the industrial pipeline and resulting flood of deliveries. The dramatic increase in costs to develop new facilities. The softening in demand from occupiers and investors.

All of these narratives and phenomena have led to an industrial real estate market that continues to be sought-after, but where decisions and negotiations have become more prevalent and more strategic.

In 2023, we saw the market cool; with rents and values stabilizing, as well as availabilities pushing up to 1.9% (the last time they were above that mark was in Q2 2018). Some tenants pulled back on expansion plans, while some downsized their footprints (see Amazon, for example). Developers became relatively more conscious of competing properties and less enthusiastic about building on-spec, while landlords also changed their mentalities from wanting to push the market’s limits on rents to being satisfied with quality tenants paying market rates.

So what will 2024 bring?

As inflation cools and interest rates are expected to plateau, perhaps we will finally see some predictability in terms of costs and values, although they will likely not come down to pre-expansion levels.

Elevated labour, land, development, and material costs mean that quality real estate will inherently maintain its value as it cannot be replaced easily, quickly, or cheaply.

Similarly, operating costs have increased noticeably in taxes, maintenance, and utilities. We are seeing a trend towards net-zero carbon (as discussed in past issues) and energy efficiencies to help offset this and meet upcoming mandates. Overall, high-cost environments lend themselves to better property management and fully-tenanted buildings.

More available options should see tenants focus more on building specifications and location, meaning high-quality facilities will continue to command a premium on older inventory. As a result, there are many opportunities to add value through infill redevelopment. Bifurcation between modern, Class-A space and functionally obsolete space will also continue.

Aside from these ‘crystal ball’ thoughts, we can be sure that there will be a curveball or two that will be impossible to predict. All one can do is try to study the market, be prepared for opportunity when it comes knocking, and do their best to roll with the punches.

That is why, for this week’s newsletter, we will analyze the GTA industrial market’s historical sales pricing data to gain a better understanding of how the market has evolved, and to help get a sense of what is to come.

GTA Historical Sales Pricing and Growth Analysis

As you can see below, the sales price per square foot of GTA industrial properties has proven the incredible value of ownership. In 2018, the weighted average asking sales price PSF was just $144.78… where in Q4 2022 it reached $502.61 PSF, before dipping to an average of $412.11 PSF in Q3 2023. 

GTA Industrial Sales Price PSF by Region, 2018 to 2023. Source: Cushman & Wakefield.

Despite the slight softening of the market, due to increased interest rates, as well as 8.6-million square feet of new deliveries in 2023 (and over 17MSF still under construction) long-term values are expected to increase, and with the understanding that individual asset valuations depend largely on specific features and location.

As alluded to earlier, as real assets are perceived to be safe havens, it is plausible to assume that fewer landlords would be willing to sell, and thus, anything available on the market (currently at 0.1% of inventory) would be subject to greater pressure on valuations. Of course, interest rates and liquidity create issues here – but – large investors sitting on cash are not subject to these limitations to the same degree, as we have seen in the various major portfolio sales. 

GTA Industrial Sales Pricing Breakdown by Region

Below, we see the differences in industrial sales volume by Region, alongside the Bank of Canada’s policy interest rate.

GTA Industrial Sales Volume vs. BOC Policy Interest Rate: 2022/23. Source: C&W and BOC.

Important Takeaways:

  • Rising interest rates have had an impact on financing – as expected – however, industrial sales volumes in the GTA peaked in Q2 2023 at over $2.6-billion, with another fantastic finish as Q4 2023 figures topped $2-billion.
  • As interest rates began their ascent, there was lots of talk about the impact on acquisitions and investment sales. While there definitely has been a major dent – and while many Buyers have been sidelined for the time being – we have seen several portfolio sales and sale-leasebacks which have made up the difference, and more.
  • The West submarkets have led the way in terms of industrial sales volumes in each and every quarter through 2022 and 2023 (as well as historically);
  • The East submarkets, with the lowest inventory (approx. 50 MSF as of Q3 2023), historically have the fewest sales; to no surprise. What the East Region does bring, however, are relatively more land development options and incentives, as well as favourable industrial rents and values (which have almost caught up to their regional counterparts);
  • The North submarkets have historically led the pack in terms of pricing per-square-foot due to a lack of inventory and development costs, however, this scarcity of product also compresses overall sales volume due to limited numbers of trades;
  • The Central submarkets are priced more attractively than the West and North markets – due to a number of factors, although every asset is different – we continue to see infill redevelopments adding value to older inventory while taking advantage of the central location and proximity to labour and transportation routes.

Major Industrial Portfolio Transactions in 2023

Below, we are featuring two of the largest industrial portfolio transactions of 2023. 

  1. Oxford Properties Sells Controlling Stake in Canadian Industrial Parks to Texas Pacific Group
Brampton Business Park. Source: Oxford Properties.

In mid-December of 2023, Oxford Properties revealed that TPG had acquired a 75% stake in its Brampton and Vaughan Business Parks for approximately $1.3-billion CAD. According to the release, TPG had been eyeing the GTA industrial market for years, impressed with its strong fundamentals and both population and employment growth. Meanwhile, Oxford plans to use the proceeds to reinvest back into development, which includes about 3-million square feet of projects expected to be completed by 2026.

  1. W.P. Carey Acquires Apotex Pharmaceutical Holdings Portfolio in Sale-Leaseback

50 Steinway Boulevard, Etobicoke. Source: CBRE.

In April 2023, it was announced that W.P. Carey had completed the approximately $468-million USD sale-leaseback of four pharmaceutical R&D and manufacturing campuses owned by Apotex Pharmaceutical Holdings.

Spanning 11 properties across the Greater Toronto Area and totalling around 2.3 million square feet, the transaction was structured as a NNN lease payable in USD and with fixed escalations over a 20-year term. The deal closed concurrently with SK Capital’s majority buyout of Apotex. 


Looking ahead, the industrial market continues to defy the broader economic uncertainty and remains highly sought-after; both to purchase and lease – it just will depend on the individual asset.

While some may say that sentiment has changed, or speak of both investors and occupiers putting plans on the shelf, vacating space, or downsizing, let’s not forget that this is typical in any normal market. What we had experienced over the past three to seven years was a landscape with constrained supply and a red-hot logistics and warehousing industry. As vacancies push up to the 2% mark (and as interest rates plateau or eventually and gradually fall) tenants will have more options, buyers will regain confidence, and pricing will further stabilize.

As is with common sense, it may certainly be more challenging or rigorous to complete a deal, obtain financing, go through development, or even secure a tenant. That said, if you currently own a well-maintained and -located industrial property within the GTA, there are still large institutional and private investors with dry powder seeking to obtain these assets, both for their strong cashflows and as a hedge against inflation and any potential threats to the financial system.

If selling your property is still something you would consider but have not followed through with for any reason, it is not too late to do so… just ensure that you go into any sales process with a clear strategy and expectations, as well as an understanding of potential outcomes.

For a confidential consultation or a complimentary opinion of value of your property please give us a call.

Until next week…

Goran Brelih and his team have been servicing Investors and Occupiers of Industrial properties in Toronto Central and Toronto North markets for the past 30 years.

Goran Brelih is an Executive Vice President for Cushman & Wakefield ULC in the Greater Toronto Area.

Over the past 30 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.

Industrial Real Estate Sales and Leasing, Investment Sales, Design-Build and Land Development

About Cushman & Wakefield ULC.
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 53,000 employees in 400 offices and 60 countries.

In 2020, the firm had revenue of $7.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com.

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 goran.brelih@cushwake.com, or visit www.goranbrelih.com.

Connect with Me Here! – Goran Brelih’s Linkedin Profile: https://ca.linkedin.com/in/goranbrelih

Goran Brelih, SIOR

Executive Vice President, Broker
Cushman & Wakefield ULC, Brokerage.

Office: 416-756-5456
Mobile: 416-458-4264
Mail: goran.brelih@cushwake.com
Website: www.goranbrelih.com


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