We had another amazing SIOR event last month. It’s always a privilege to connect with people at the forefront of the industry; to hear what they are practicing in their brokerage business.
From attending different lectures and listening in, I came up with a list of key takeaways: with an emphasis on industrial real estate, logistics, valuations, CAP rates, and ‘last mile’ warehousing.
- Industrial Market Investment Activity will remain strong, and net rental rates and valuations of industrial buildings will continue to increase, while there is an expectation that CAP rates may be further compressed.
- There is a great demand for existing industrial product, industrial land and redevelopment sites from private investors, pension funds and foreign capital, as well as direct users looking to expand and consolidate their operations.
- A tremendous amount of capital is being deployed in the Industrial Real Estate Market which, will continue for the foreseeable future.
- The general state of the economy, the expansion of e-commerce and the availability of Investment Capital is fuelling the growth of the Industrial Sector.
- E-Commerce is evolving daily and there is a great demand for “last mile” locations and other product in core, supply-constrained markets across North America.
- It is estimated that about 20% of all current retail is e-commerce, and it is estimated to grow to 50% over the next few years, representing considerable growth.
- Last Mile facilities and other infill development products are seen as the most prominent, highly sought after opportunities to expand investment portfolios.
- Same day delivery is becoming more important to consumers, therefore any possible redevelopment sites deeper in the core of urban areas are being sold under multiple offers.
- Many grocery retailers like Walmart, Costco, Loblaws and Whole Foods are entering e-commerce, requiring locations as close as possible to urban areas in order to fulfil orders with same day delivery.
- Warehouse automation and robotics are changing the landscape in warehouse use and design. Just take a look at “Ocado Technology” and “Daifuku,” which has allowed grocery retailers and Uniqlo to reduce its warehouse labour by 90%.
- “Ocado Smart Platform”, known as “The Tesla of Grocery” is a hardware, software, logistics, robotics and AI system that automates the picking and packing of individual grocery orders in massive warehouses.
- The greatest threat to the Industrial Market comes from a lack of land to develop, an increase in industrial land values, and both construction and raw material cost. Supply of new construction just can’t keep up with the current demand.
As we approach the end of 2018 we can expect large pension funds, REIT’s and other institutional investors and wealth managers to continue to look for industrial product to add to their portfolios.
Such demand coupled with a historically low supply will keep pricing high and potentially compress CAP Rates further, creating higher valuations.
While e-commerce and 3PL continues to grow, there is still very healthy demand from other sectors; specifically, food manufacturing.
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, email at firstname.lastname@example.org, or visit www.goranbrelih.com.