Industrial Building Development Process

Creating Opportunity Where There Seemingly Is None…

Long gone are the days of finding easy opportunity. Back when you could simply search MLS, make a few phone calls, or drive around and see signage posted on well-situated plots of land going for relatively cheap… completing a transaction isn’t quite the same.

Now, that doesn’t mean that opportunity isn’t still in abundance.

It is.

Yet you are really in the business of seeing and creating it where others don’t, can’t, or won’t.

In a highly fragmented market with high turnover and trade volume, you bump into deals on a daily basis. Consolidation occurs. Assets are generally undervalued and people are more motivated to take action.

As markets begin to go on a run; whether due to a boom in a given vertical (such as e-commerce or logistics) or external forces such as low-interest rate environments or policy changes, they can then cause a geographic market (like the Greater Toronto Area) or an asset class (such as industrial) to become popular.

Deals are snapped up quickly. Here, one would need to ‘tap into their deep relationships’ and gain access to opportunity that others can’t reach on the surface.

As this continues and availability rates decline, rental rates increase, and both CAP rates and trade volume continually compress… the key players involved in the market must leverage outside-the-box solutions to find action. Today, one of the most straightforward approaches is to simply build a property yourself.

So if you have purchased an industrial site and are contemplating developing it in order to construct an industrial building…

Then what are the steps you will need to take to complete the project?

We will take a closer look at this process based on a generic development site in the City of Toronto.

Site Plan Control Application Process

First, you should make arrangements for a Pre-Application Consultation Meeting with the City of Toronto Planning Division to identify key issues and the approvals that will be required. You’ll need to identify the supporting drawings, reports, and studies required to achieve complete application status in accordance with the Planning Act and the Toronto Official Plan.

The information identified under the Official Plan Amendment, Zoning By-law Amendment, Plan of Subdivision and Plan of Condominium sections must be provided in accordance with the provisions of the Planning Act and the Toronto Official Plan.

The information identified under the Site Plan Control Application section is requested by the City in order to ensure your site plan control application is evaluated efficiently.

You will need to submit a completed Development Approval Application Form and applicable fees. In an ideal world, you will not need to amend the Official Plan and Zoning By Law, and you would only submit the documents required to go with your Site Plan Control Application, which are:

Development Approval Application
Boundary Plan of Survey
Site Plan
Site Grading Plan
Floor Plans
Roof Plan
Site and Building Elevations
Landscape Plan
Tree Preservation Plan
Public Utilities Plan

The Pre-Application meeting involves several departments; from engineering to public works, etc. and you will get a fairly good sense of the degree of support from each department for the proposed development concept. Furthermore, it will be determined exactly what other studies you will need to obtain, most likely to be one or all of the following:

Traffic Operations Assessment
Geotechnical Study
Storm Water Management Report
Servicing Report
Arborist/Tree Preservation Report
Energy Efficiency Report

And not to forget, you will need to comply with Toronto Green Standards and Green Roof By-Law.

Site Plan Control Application Process Flowchart

Site Plan Control Application Process Flowchart, Credit: City of Toronto

Development Approval Application

The Development Approval Application Form will determine if you are applying for an Official Plan Amendment, a Zoning-By-Law Amendment, Site Plan Control, Part Lot Control, Draft Plan of Subdivision, or for a Condominium Application.

The Address of Subject Lands, location, legal description, and registered owners contact information is required, as well as a clarification on the following:

Archeological Potential
Designation under the Ontario Heritage Act
Easements or restrictive covenants affecting the subject lands
Are lands proposed to be removed from Employment Area
Does the land contain six or more residential rental units
Is the application consistent with the Provincial Policy Statement
Does it conflict with any Provincial Plans ( Greenbelt Plan or the Growth Plan for the Greater Golden Horseshoe Area)

The fee for the Site Plan Control Development Approval consists of the base fee of $25,000 plus $7.05 per buildable m2 of the proposed development; some other surcharges may also be applicable.

The City Planning Division will notify you of outstanding material required within 30 days of your submission, as required by the Planning Act. There may be additional financial requirements arising from the application to be paid, including, but not limited to, park dedication or cash-in-lieu, peer review of technical reports, agreements and associated fees, and applicable securities.

Prior to making arrangements for a Pre-Application Consultation meeting with the City of Toronto staff and formally submitting a Development Application, you should produce a Planning Rationale Report to see if the proposed planning is even possible and what challenges may arise along the way if any.

Planning Rationale

The Planning Rationale is a Report prepared by a planning consultant in support of a Site Plan Control Application to permit such development. Its purpose is to demonstrate that the proposal keeps within the land-use planning framework established by the applicable policy and regulatory documents, specifically the:

Provincial Policy Statement, the
Growth Plan for the Golden Horseshoe, the
City of Toronto Official Plan, and the
City of North York Zoning By-law 7625

The Planning Rationale describes in more detail, the:

Site and Surrounding Area, the
Proposed Development, and the
Policy and Regulatory Context

Part of such Policy and Regulatory Context includes:

Zoning By-Laws.
City of Toronto Official Plan, and any
Growth Plan for the Greater Golden Horseshoe (2017), and the
Provincial Policy Statement.

Let’s quickly review the content of such a report…..

The Site and Surrounding Area

This section will describe the site itself, its immediate and general location, and its proximity to the surrounding transportation network, major highways, and public transportation.

The Proposed Development

The Proposed development section describes the design, as well as provides key characteristics, such as the:

Gross floor area,
Height,
Amenity space,
Parking,
Loading,
Access,

as well as the Site Plan, and Building Elevations.

Policy and Regulatory Context

Provincial Policy Statement – The Provincial Policy Statement (“PPS”) came into effect on April 30, 2014, and provides policy direction on matters of Provincial interest related to land use planning and development. In accordance with Section 3(5) of the Planning Act, all land-use planning decisions are required to be consistent with the PPS.
Growth Plan for the Greater Golden Horseshoe (2017) – The Growth Plan for the Greater Golden Horseshoe (the “Growth Plan”) was updated in May 2017 and came into effect on July 1, 2017, replacing the previous Growth Plan (2006). All decisions made on or after this date in respect to the exercise of any authority that affects a planning matter shall conform with the Growth Plan (2017), subject to any legislative or regularity provisions providing otherwise. Similar to the PPS, the Growth Plan recognizes the need to provide opportunities for a variety of businesses to locate and grow in the Greater Golden Horseshoe, through ensuring that an adequate supply of land is retained within employment areas for both traditional industries and for service-sector and knowledge-based businesses
City of Toronto Official Plan – The Official Plan for the amalgamated City of Toronto (the “Plan”) was adopted on November 26, 2002, and was approved by the Ontario Municipal Board on July 6, 2006. Numerous amendments to the Official Plan have subsequently been approved, including amendments arising out of the Official Plan Review initiated in 2011.
Zoning – The in-force Zoning By-Law applying to this particular site is the former City of North York Zoning By-Law 7625, as amended. Although the subject site is included within the new city-wide Zoning By-Law 569-2013, this by-law has been appealed to the Ontario Municipal Board in its entirety. While portions of the new by-law have now been approved by the Board, it is not yet fully in force.
Zoning By-Law 7625 – a broad range of commercial and industrial uses are permitted, including industrial sales and service, manufacturing, office uses, and warehousing, among others. In order to provide the flexibility required for the design of the range of uses permitted, many of the typical zone regulations as a lot have not been specified for. In this regard, the limited zoning regulations that apply to the proposal are as follows:
Floor Space Index
Yard Setbacks
Landscaping
Maximum Building Height
Outside Storage and Outside Operations
Parking
Zoning By-Law 569-2013 – The subject site will be zoned Employment Heavy Industrial “EH 1.0” under the new City-wide Zoning By-law 569-2013, this zone permits a variety of industrial uses which are generally similar in nature to those permitted in the M3 zone under By-law 7625 with some exceptions.

Hopefully, the Planning Rationale Report will determine that the proposed development fully complies with all of the above-mentioned policies and that the Development Application submitted will be approved by the municipality without delay.

A few other reports will also be required (which we will talk about in more details next week), such as:

A Transportation Impact Study,
An Arborist/Tree Preservation Report and/or Declaration, and
Survey Plans.

So, why would you decide to purchase an “infill site” in the City of Toronto and redevelop it as opposed to going with greenfield? What are the pros and cons of redeveloping industrial properties in the City of Toronto?

A few of the Pros are:

Central location with proximity to greater population density and labour pool (which is becoming a major issue for many employers since we are at the lowest unemployment levels in the last forty years)
Proximity to transportation networks,
Proximity to public transportation,
The lowest Development Charges in GTA & GGHA (currently only $1.07 per buildable SF vs. $36.91 per buildable SF in the City of Vaughan)

While some of the main Cons are:

Potential need to remediate existing contamination, if applicable
Demolition cost, if applicable
Larger land sites suitable for redevelopment are rare finds

City of Toronto – Current Industrial Developments

Since we are talking about industrial developments in the City of Toronto, let’s review the most up-to-date information:

Main points:

We expect all the properties currently under construction (1.736 MSF) to be completed by end of year
Construction of roughly 2 MSF is expected to start within next 18-24 months
So far this year, developers have purchased about 75 acres of industrial land, adding more supply in the next 24 months

City of Toronto – Industrial Developments, Buildings Under Construction

1395 Tapscott Road, Scarborough – Source: First Gulf

City of Toronto – Proposed & Committed Industrial Developments

40 Norelco Drive, North York, Rendering – Courtesy of Triovest

40 Norelco Drive, North York, Site Plan – Courtesy of Triovest

City of Toronto – Recently Acquired Industrial Land Sites For Future Redevelopment

Beedie Proposed Development – Source: Beedie

Conclusion:

The Greater Toronto Area Industrial Market is one of the “tightest” markets in North America with vacancy rates for small- and mid-size-bay product starting at 0.2% and going up to about 1.4 % for larger facilities.

The market is largely being driven by e-commerce and a continuous increase in online retail sales.

Institutional and private investors looking for product are out of luck, and since they can’t find it they are forced to create it through development.

Large warehouse and distribution properties are being constructed further out in “the field” – meaning the fringes and periphery – where larger land sites are available. Millions of square feet are being pre-leased to e-commerce companies.

Infill sites are becoming extremely important as a solution for the “last mile” problem in the supply chain. Because of this, we will see more and more of this kind of redevelopment within the City of Toronto. Obviously, however, this activity is limited to if and where such industrial land sites suitable for redevelopment can be found; and with close proximity to greater population density. These sites are becoming more and more valuable, and the pricing per acre keeps on increasing at a quick pace.

Smart developers and investors have realized that few have been paying attention to the small- and mid-size-bay product. Hence, they have started converting existing multi-tenant industrial buildings to condominiums, as well as building from the ground up.

Overall, I hope you can get a sense of the frame of mind investors are taking to deal with the changing market landscape. We live in a world full of abundant opportunity, yet it is not always so directly attainable due to competition and the forces of economics.

If you have been considering employing a creative strategy or solution towards investing, selling, or developing industrial real estate, then give us a call. Our team of experts can supply an additional perspective, as well as guidance and market intel from the street level.

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 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 Immediate Past 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.

Specialties:

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