Q1 2022 Insight, Toronto-North Markets

Establishing True Valuations Across Differing Markets 

May 6th, 2022

“Wind extinguishes a candle and energizes fire.”

  • Nassim Taleb

Structural shifts within the economy are an effective accelerant of the existing underlying principles.

Look at office. Look at retail.

The ongoing growth of e-commerce vis-a-vis platforms such as Amazon and Shopify were already affecting brick-and-mortar stores leading up to the pandemic and the resulting switch towards online ordering and home deliveries.

Likewise, the combination of technology, outsourcing, virtual collaboration, and project management had begun to reduce the need for functions such as printing, storage, and in-person meetings. As administrative tasks were streamlined, this translated into the leaning out of firms; making vast office footprints of the previous decades unnecessary. As soon as businesses were forced to work remotely, the switch was flipped. The very concept of the office was challenged and put into question.

As a whole, these sudden and immediate shocks to demand changed employee and consumer behaviours overnight. We then collectively decided that the new way just might be a better way.

While office and retail are on the road to recovery and will evolve and adapt to focus on the experiential and cultural elements of their respective spaces, the past two years have provided them with a baptism by fire. Soon, this too will pass for the struggling sectors, yet, I doubt many of the stakeholders involved would excitedly jump at the opportunity to relive their arduous experiences.

The same may also be said by the investors, developers, and users within the industrial market. Growth is great for business. Yet, the unrelenting pace of acquisitions, leasing, and development – coupled with material and labour shortages – is no easy feat to deal with on a daily and weekly basis.

The aforementioned rise of e-commerce sparked the realization that growing online platforms would need a back-end of logistics, warehousing, and transportation space to facilitate the fulfilment of the millions of one-click purchases and 48-hour delivery promises.

And so it began. The kindling had been lit.

However, the ensuing chaos and uncertainty would only fan the flames.

Which brings us to today. Space is so scarce that users are now planning 2 to 3 years out. And with little readily available to purchase, investors are either bullying their way in with uber-premium pricing. Or they’re snapping up land anywhere they can find it.

As these values ripple downstream into rents upon renewals, we will begin to see the real effects take place. Will users be able to afford a doubling or tripling of their real estate costs? How will the market support these structural shifts long-term – both in tapping demand and providing adequate suply?

These are questions we should ponder as the Greater Toronto industrial market undergoes a remarkable transformation and begins to integrate into the City’s infrastructure and its people.

With that said, let’s examine how each of the various regions performed in Q1 2022, and where we expect the market to go moving forward.

Key Takeaways from Q1 2022 – Toronto North Markets

  • The availability rate fell from 0.7% to 0.6%, with a lease availability rate of 0.6% and a sale availability rate close to 0% (50,768 SF out of 157M SF of inventory);
  • We had 563,788 SF of construction completed and 4,639,097 SF still under construction; 
  • We had absorption of 701,299 SF;
  • The weighted average asking net rent was $12.76 with additional rent of $4.60 PSF; and 
  • There is no calculable weighted average asking sale price due to the almost non-existent inventory.

Why are the GTA North Markets in such demand?

Generally, the Toronto-North markets have newer product with higher ceiling heights and better shipping access. Further, there are benefits from access to major transportation routes.  

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 North Markets (Vaughan, Markham, Richmond Hill, Aurora, Newmarket, Stouffville)

Statistical Summary – GTA North Markets – Q1 2022 



Q1 2022 GTA Industrial Market Overview – Source: Cushman & Wakefield

Q1 2022, Industrial Market Overview – Source: Cushman & Wakefield
So let’s take a closer look at how the different Toronto North Markets performed during Q1 2022…

GTA North Markets (Vaughan)

Properties Sold between January 2022 – March 2022, from 20,000 SF plus 
In the Vaughan submarket in Q1 2022, a total of 4 properties were sold (655,513 SF); 3 were investment sales and 1 was a user sale. The prices achieved were in the range of $217 PSF – $332 PSF, with an average building size of 163,878 SF and an average price of $261 PSF. 

8301 Keele Street, Vaughan
GTA North Markets (Vaughan)
Properties Leased between January 2022 – March 2022, from 20,000 SF plus
In the Vaughan submarket, 7 properties were leased (totalling 527,392 SF) in Q1 2022. The net rental rates achieved were from $11.50 PSF – $15.85 PSF, with an average building size of 75,342 SF and an average net rental rate of $13.73 PSF.  
51 Vinyl Court, Vaughan
GTA North Markets (Markham)
Properties Sold between January 2022 – March 2022, from 20,000 SF plus  
In the Markham submarket in Q1 2022, one property was sold (25,925 SF) for $203 PSF.

230 Don Park Road, Markham
GTA North Markets (Markham)
Properties Leased between January 2022 – March 2022, from 20,000 SF plus
In the Markham submarket, 3 properties were leased (totalling 97,002 SF) in Q1 2022. The average net rental rate achieved was $15.00 PSF, with an average building size of 32,334 SF.

65 Travail Road, Markham
GTA North Markets (Richmond Hill)
Properties Sold between January 2022 – March 2022, from 20,000 SF plus   
In the Richmond Hill submarket in Q1 2022, a total of 2 properties were sold (114,50 SF); both were investment sales. The prices achieved were in the range of $316 PSF – $317 PSF, with an average building size of  57,275 SF and an average price of $317 PSF. 

60 East Beaver Creek Road, Richmond Hill
GTA North Markets (Richmond Hill)
Properties Leased between January 2022 – March 2022, from 20,000 SF plus
In the Richmond Hill submarket in Q1 2022, 2 properties were leased (74,281 SF). The net rental rates achieved were in the range of $14.00 PSF – $14.95 PSF, with an average building size of  37,141 SF and an average net rental rate of $14.48 PSF. 

490 Elgin Mills Road East, Richmond Hill
GTA North Markets (Aurora/Newmarket)
Properties Sold between January 2022 – March 2022, from 20,000 SF plus   
In the Aurora/Newmarket submarkets in Q1 2022, 1 property was sold (30,000 SF) for $200 PSF.

265 Pony Drive, Newmarket
GTA North Markets (Aurora/Newmarket)
Properties Leased between January 2022 – March 2022, from 20,000 SF plus
In the Aurora/Newmarket submarkets in Q1 2022, 2 properties were leased (50,004 SF). The net rental rates achieved were in the range of $11.75 PSF – $12.95 PSF, with an average building size of 25,002 SF and an average net rental rate of $12.35 PSF. 

205 Industrial Parkway North, Aurora
GTA North Markets (Whitchurch-Stouffville/East Gwillimbury)
Properties Sold between January 2022 – March 2022, from 20,000 SF plus
In the Whitchurch-Stouffville/East Gwillimbury submarkets in Q1 2022, a total of 3 properties were sold (417,469 SF); 2 were investment sales and 1 was a user sale. The prices achieved were in the range of $87 PSF – $292 PSF, with an average building size of 139,156 SF and an average price of $162 PSF.

67 Toll Road, East Gwillimbury
GTA North Markets (Whitchurch-Stouffville/East Gwillimbury)
Properties Leased between January 2022 – March 2022, from 20,000 SF plus
One property was leased in the Whitchurch-Stouffville/East Gwillimbury submarket in Q1 2022 for $12.00 PSF. 

42 Cardico Drive, Whitchurch-Stouffville

What Lies Ahead:

  1. Rental Rates: The Toronto-North markets now have the second-highest weighted average rental rates at $12.76 PSF, behind by the West markets at $14.20 PSF and slightly ahead of the Central markets at $12.50 PSF. Keep in mind that rental rates are also subject to annual escalations. We continue to see a general upward pressure across the board into double-digit territory, depending on a number of factors, such as building size, location, ceiling height, etc. Based on the increase of value of industrial land, infill sites, construction costs, etc… we can only see these rates continue to grow. Overall, we are still in a Landlord’s market. 
  2. Property Values: Only 50,768 SF of industrial space is currently reported for sale in the North markets, while 883,953 SF of space traded in Q1 2022. From this, we can see that values continue to increase, depending on the building size and location. We see pricing going as far north as $400 PSF, and more. CAP rates are somewhere between 3.5% to 4.5% but it really depends on the rental rates in place. If we have older rental rates with immediate growth potential, then CAP rates could end up below this range. 
  3. Development Opportunities: The Toronto-North markets still have quite a bit of land available for development in Vaughan-West along Highway 50. We are also going to see further development along Highway 400 as land sites in more central areas become more scarce. Regarding industrial land, pricing generally continues to increase. 
Conclusion:

So, how much is your property really worth?

What rental rate can you expect or how much per SF would you be able to get if you sell your building? How much can we compress CAP rates to create even greater value?

Well, the answers to these questions will depend on a variety of factors, many of which we can quickly uncover in an assessment of your situation. And with our rental rates and valuations at all-time highs, and vacancy rates low, finding the right property is a real challenge.

Having said that, a lot of transactions are being done off the market.. and to participate in that, you should connect with experienced brokers that have long-standing relationships with property owners.  

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 29 years.

Goran Brelih is a Senior Vice President for Cushman & Wakefield ULC in the Greater Toronto Area.

Over the past 29 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.

Specialties:
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 goran.brelih@cushwake.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.
www.cushmanwakefield.com

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

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