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 %
TRENDS
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
CLOSING THOUGHTS
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 goran.brelih@cushwake.com
