Q1 2021 Insight, Toronto-West Markets

Establishing True Valuations Across Differing Markets 

May 7th, 2021

Spring is finally upon us, and despite the sunny outlook and promising signs of global recovery, the Greater Toronto Area is still dealing with the aftermath of a dark winter. Specifically, we have found ourselves in yet another lockdown. Only this time around, all non-essential goods at retailers such as WalMart and Costco have been blocked off, forcing consumers to purchase all of their non-food or medical-related items online.

While this may not seem like much… and while it may not be a huge inconvenience to us as customers of these establishments… this small policy change may have increased household online order volume by a factor of two or three, overnight. Where we once delivered a full carload of supplies home, a sizeable portion must now be picked off warehouse shelving elsewhere (essentially, duplicate inventory) and shipped via freight, LTL truck, or last-mile delivery vans.

Multiply this effect over millions of households in Southern Ontario and you get an even further strained supply chain and logistics network.

So what does this mean in the context of the industrial market?

Well, for a market that was already at sub-2% availabilities for 11 straight months, it means the competition for industrial space will only increase.

Retailers hoping for everything to re-open by May or June might finally be convinced that an e-commerce pivot (or add-on) is necessary to survive. Grocery delivery services are naturally blossoming and eating up dry and cold storage space. And 3PLs are swallowing up inventories at a torrid pace while maturing and diversifying their services with flexible offerings such as ‘warehousing on-demand.’

And so, we find ourselves back where we seem to always be. 

New sectors and applications for industrial bolstering demand… And still no answer to the issue of a chronic lack of space.

Key Takeaways from Q1 2021

• The overall availability rate in the GTA-West Markets in Q1 2021 is 1.4%, down from 1.6% in Q4 2020;
• Currently, there is about 4,828,000 SF under construction in the GTA-West Markets;
• The GTA West markets delivered 635,000 SF of new space to the market in Q1 2021;
• Absorption in Q1 2021 was 909,000 SF;
• The City of Brampton achieved the highest net rental rates in Q1 2021 at $12.19 PSF, followed by City of Oakville and Milton/Halton Hills with $11.12 PSF;
• Availability rate across GTA is 1.5%, down from 1.7% in Q4 2020, while the weighted average net rental rates in GTA West markets reached $10.53 per SF up from $10.46 per SF in Q4 2020; while the weighted average sale price in the West markets was $274.39 per SF, up from $253.48 per SF in Q4 2020 and $247.62 per SF in Q3 2020.

Why are the GTA West Markets in such demand?

The GTA West Industrial Markets are by far the largest industrial markets in the GTA, representing about 45% of GTA Industrial Inventory, or about 370,000,000 SF. The GTA West Markets were very active this quarter, with more than 4,828,000 SF under construction and a flurry of lease and sale transactions completed. 

So, if you are an Investor, Landlord, or Owner-Occupier you may be wondering…

“How much is my property really worth?” 

What rental rate can I expect? How much $/PSF would I be able to get if I sold my building?

These questions are being asked all the time.

The answer to this will depend on a range of factors, including: 

• the age and size of the building, 
• lot size, 
• ceiling height, 
• office component, 
• parking, 
• trucking access, 
• truck parking if available, etc….

In order to get to the truth, we need to dig a bit deeper…

This week we are covering the Toronto-West Markets (Mississauga, Brampton, Oakville, Milton, Caledon, Burlington & Halton Hills)

Statistical Summary – GTA West Industrial Market – Q1 2021

So let’s take a closer look at how the Toronto West Markets performed during Q1 2021…

GTA West Markets (Mississauga)
Properties Sold between January 2021 – March 2021, from 20,000 SF plus

GTA West Markets (Mississauga)
Properties Leased between January 2021 – March 2021, from 20,000 SF – 50,000 SF

On the leasing side, a total of 22 properties were leased between 20,000 – 50,000 SF. The net rental rates achieved were from $7.65 PSF – $10.95 PSF, with an average building size of 33,506 SF and an average net rental rate of $9.91 PSF.

GTA West Markets (Mississauga)
Properties Leased between January 2021 – March 2021, from 50,000 SF – 100,000 SF

GTA West Markets (Mississauga)
Properties Leased between January 2021 – March 2021, from 100,000 SF plus

1. Rental Rates: We see many transactions achieving in excess of $10 PSF net. We are also hearing that some of the current developments are increasing their price guidance to above $12 PSF net. That trend will continue.

2. Property Values: With Brampton’s weighted average asking sale price at $361.99 PSF and Mississauga’s at $353.90… these submarkets lead the GTA-West markets. And with a sale availability rate of 0.1%, prices will appreciate further.

3. Development Opportunities: In the first quarter of 2021, we had over 4.8 million square feet under construction in the GTA-West markets. This represents 41% of all new development across the GTA (11.8 million SF), making this the most active region by far. This comes as no surprise as the West markets have the most land available for development.

Conclusion:

Goran Brelih, SIOR

Senior Vice President, Broker
Cushman & Wakefield ULC, Brokerage.
www.cushmanwakefield.com
Immediate Past President, SIOR – Central Canada Chapter
www.siorccc.org

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