Markham Industrial Market: An In-Depth Look
June 17th, 2022
Demand for industrial product has become a runaway train. Both from a leasing and acquisition perspective, there isn’t a week that goes by where an investor, developer, or occupier makes its known that they have a requirement for hundreds of thousands of square feet of space or dozens of acres of industrial land.
At the same time, these very same investors and developers are redlining their operations in trying to bring onboard more inventory. Even with the constraints of labour and material shortages, the GTA is seeing over 16.8M SF of space under construction; a massive accomplishment by the community. That said, even with the torrid pace of land acquisition and development, values and rents continue to rise exponentially.
Whereas, just a few years ago, an industrial user could select from multiple sites and secure their facility for $5-7 PSF net, each opportunity now means dealing with heavy competition for fewer options and forking over as much as $18-20 PSF net.
This appreciation is due, in part, to the inflated cost of purchasing and building facilities. It is a simple exercise of underwriting or creating a pro forma to hit the necessary returns, which then trickle down in the form of higher rents. Then, as new benchmarks are set, the community is able to establish higher valuations for the transactions that follow.
Looking forward, as interest rates continue to rise, what will happen is still unclear. On one hand, developing will become more expensive. On the other, asset prices tend to cool as the Buyer pool thins out. Furthermore, some Occupiers may simply walk if and when asking rents are no longer feasible for their business plan.
As a result, the Investors and Occupiers remaining at the table will be those with economies of scale and deep pockets, who can absorb these costs, secure better financing terms, or go in all cash. The landscape and dynamics within the market may certainly shift, however, thinking that values will suddenly go down is unrealistic, barring any significant economic crash. At that point, however, all bets are off, and it would be impossible to predict how things unfold. In any event, industrial space remains scarce, highly-sought-after, and incredibly valuable to an economy seeking to develop independence in its manufacturing and supply chains.
With this context set, that is why, in the coming weeks, we will continue our submarket analysis, with a focus on the GTA North markets. We will aim to provide some deep insight into each, as well as provide some detail on potential opportunities that may fit in with your real estate or investment strategy.
For this week’s newsletter, we’ll feature the City of Markham and examine the state of its industrial market, including trends, transactions, and developments.
Markham Industrial Market Snapshot – Q1 2022
Source: Cushman & Wakefield Research.
Looking at the current inventory numbers, we have over 803M SF of industrial space across the GTA; yet Markham’s share is just over 31.9M SF (about 3.97%). In Q1 2022, however, Markham had approximately 379,962 SF of absorption and 323,388 SF of new supply; the total being net negative.
The availability rate in Markham sits at 1.1% and should further tighten with the broader market, even though 525,832 SF of industrial space is under construction. Furthermore, industrial rents in Markham are some of the highest across the entire GTA at an average of $15.69 PSF net, and these should continue to increase closer to $18-20 PSF net over the coming months.
Three Interesting Facts about Markham’s Industrial Market
Over the past few years, Markham has seen a number of new developments. Below, we are featuring three industrial properties that are either under construction or proposed.
Site Plan of 11050 Woodbine Avenue. Source: CBRE, Fiera, & Berkshire Axis.
Fiera and Berkshire Axis have developed two new, state-of-the-art logistics facilities at 11050 Woodbine Avenue. Building 1 is 300,000 SF in size with 40 truck-level and 7 drive-in doors, while Building 2 is 330,000 SF in size with 37 truck-level and 7 drive-in doors. Both offer 36’ clear height.
The business park has direct exposure along Highway 404, providing great access to major transportation routes and the labour pool. CBRE represented the developers in marketing the asset, which is now fully pre-leased.
2. 10950 & 10952 Woodbine Avenue – Fiera & Berkshire Axis – New Industrial Condo Development
Rendering of 10950 & 10952 Woodbine Avenue. Source: Fiera & Berkshire Axis.
Just down the road, Fiera and Berkshire Axis are developing industrial condominiums at 10950 Woodbine Avenue and 10952 Woodbine Avenue, which are 55,000 SF and 74,400 SF in size, respectively. Both buildings offer 24’ clear height and only have drive-in doors for shipping. All industrial condominium units are fully sold-out or pre-leased.
Given the lack of small- and mid-bay options across the GTA, projects such as these provide an excellent opportunity to industrial occupiers to own modern space without having to develop or significantly upgrade obsolete inventory.
3. 1 Steelcase Road West – QuadReal – Proposed Development
Conceptual Site Plan of 1 Steelcase Road West. Source: City of Markham.
QuadReal is proposing the redevelopment of the site at 1 Steelcase Road West to construct 787,594 SF of industrial space over 3 buildings. The first facility will incorporate a portion of the existing property and will total 336,738 SF over two storeys and with a covered truck court. Building 2 will have a footprint of 196,540 SF, while Building 3 will be 254,316 SF in size.
Located at the corner of Steelcase Road West and Woodbine Avenue, the business park is just a stone’s throw from Highways 404 and 407, offering excellent access to the GTA’s major transportation routes and the labour pool.
If we keep at our current pace, it’s conceivable that we may get to a 0% availability across the GTA, aside from brief periods between Tenants, design-build projects, or speculative construction (which are themselves often pre-leased well in advance). For those businesses looking to purchase or lease existing space, things will only become more challenging and competitive.
These points underscore the tremendous value of land. While land is becoming increasingly expensive, municipalities such as Markham present opportunities for greenfield development, infill redevelopment, or intensification of use. With great access to major transportation routes and the suburban labour pool, Markham makes a great location for industrial occupiers, however, very little space is available. With rents continuing to escalate at a rapid pace, we may see more owner-occupiers building or redeveloping sites for their own use; giving them back some control in their cost forecasts and general occupancy.
In the coming weeks, we will continue our examination of various submarkets with the aim of uncovering potential opportunities and strategies for industrial Owners and Occupiers. In the meantime, if you are an owner of industrial land or property with redevelopment potential, there are plenty of institutional and private buyers who would be willing to pay a premium to take it off your hands.
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 a Senior 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.
Goran is a Past President of the SIOR ‐ Society of Industrial and Office Realtors, Central Canadian Chapter.
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 email@example.com, or visit www.goranbrelih.com.
Connect with Me Here! – Goran Brelih’s Linkedin Profile: https://ca.linkedin.com/in/goranbrelih
Goran Brelih, SIOR
Senior Vice President, Broker
Cushman & Wakefield ULC, Brokerage.