[Report] Q2 2021: Toronto-Central Markets

Q2 2021 Insight, Toronto-Central Markets

Establishing True Valuations Across Differing Markets 

July 23rd, 2021

Suppose a vote were taken by all of the commercial real estate professionals in the Greater Toronto Area.

Which asset class would they likely agree is the most in demand right now? Chances are, they would be fighting over who could shout out “Industrial!” first.

Now, let’s suppose we asked them a follow-up question as to why that is the case. Again, we would probably hear testimony applauding the specific type of space whose use perfectly complements the needs of many burgeoning industry sectors. Let’s face it, companies such as Amazon, WalMart, GoodFood, Costco, Home Depot, and Lowe’s haven’t been doing so bad lately.

Once the praise and excitement wore off, however, we may hear the grumbles and undertones of frustration – or even, desperation – cut through the crowd. That’s because the supply of industrial properties throughout the GTA is tapped out almost immediately as any new supply is released to the market. In fact, most of this ‘new supply’ are simply renderings of state-of-the-art facilities to one day take the place of dozens of acres of dirt; pre-leasing becoming a standard vehicle for securing space.

Yet when truly examining the broader commercial real estate industry, the fact that industrial real estate is in its current position might seem baffling. Out of all the various property types, industrial is the definition of simplicity.

Four walls on a slab. Covered by a roof. That’s it.

Yes, there are many ways to elevate the features to another level – but – both its form and function are repeatable and predictable.

Which begs the question… why is product so scarce?

Now, we’ve been down this road many times before, but, needless to say, we are simply going through growing pains. The market can only grow so fast (no matter how quickly it would like to). And bottlenecks are occurring at almost every stage of the process, from servicing land to permitting, and constructing, and sourcing inputs such as labour and raw materials.

Opportunity will present itself, albeit sometimes in unexpected and unpredictable ways. Investors seeking to deploy capital will need to remain competitive. Meanwhile, Users in need of a new home should remain patient and persistent while not being discouraged by changing pricing. And Landlords or Owner-Occupiers considering selling will have most of the bargaining power, and thus, should find ways to maximize proceeds.

The past couple of years have been chock full of change. However, barring any significant unexpected events, we should expect industrial real estate to continue cruising on its current trajectory for the months and years to come.

Key Takeaways from Q2 2021 – Toronto Central Markets

  • The availability rate decreased from 1.6% to 1.3%, with a lease availability rate of 1.2% and a sale availability rate of 0.1%;
  • We had 1,408,738 SF under construction;
  • We had 400,461 SF of absorption;
  • The weighted average asking net rent was $10.75 PSF, up from $10.43 the previous quarter, with additional rent of $3.76 PSF; and
  • The weighted average asking sale price was $286.67 PSF.

Why are the GTA Central Markets in such demand?

Is it proximity to labour and a higher population density, and thus, a reduction in transportation cost? Or is it savings in development charges vs 905 areas, proximity to major transportation nodes, highways, public transportation, etc?… Or all of the above?

Well, one thing is for certain, the Toronto-Central Markets are highly sought-after by both Investors and Occupiers of commercial real estate and is an environment worth exploring for opportunities. 

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 Central Markets (Toronto, North York, Etobicoke & Scarborough)

Statistical Summary – GTA Central Markets – Q2 2021 



Q2 2021 GTA Industrial Market Overview – Source: Cushman & Wakefield

Q2 2021, Industrial Market Overview – Source: Cushman & Wakefield
So let’s take a closer look at how the different Toronto Central Markets performed during Q2 2021…

GTA Central Markets (Toronto)
Properties Sold between April 2021 – June 2021, from 20,000 SF plus  

In the Toronto Sub-Market in Q2 2021, a total of 3 properties were sold (66,951 SF); 2 of which were user sales. The prices achieved were in the range of $288 PSF – $422 PSF, with an average building size of 22,317 SF and an average price of $335 PSF. 

1384 Dufferin Street, Toronto

GTA Central Markets (Toronto)
Properties Leased between April 2021 – June 2021, from 20,000 SF plus

No properties were leased in the Toronto sub-market in Q2 2021. 

GTA Central Markets (Scarborough)
Properties Sold between April 2021 – June 2021, from 20,000 SF plus  

In the Scarborough Sub-Market in Q2 2021, a total of 4 properties were sold (673,647 SF); 1 of which was an investment sale, and 1 a user sale. The prices achieved were in the range of $122 PSF – $260 PSF, with an average building size of 168,412 SF and an average price of $160 PSF. 

601-607 Milner Avenue, Scarborough

GTA Central Markets (Scarborough)
Properties Leased between April 2021 – June 2021, from 20,000 SF plus

In the Scarborough Sub Market, 6 properties were leased (totalling 497,850 SF) in Q2 2021. The net rental rates achieved were from $6.00 PSF to $12.00 PSF, with an average building size of 82,975 SF and an average net rental rate of $8.03 PSF. 
1 Toyota Place / 830 Progress Avenue, Scarborough

GTA Central Markets (North York)
Properties Sold between April 2021 – June 2021, from 20,000 SF plus  

In the North York Sub-Market in Q2 2021, a total of 5 properties were sold (589,673 SF); 3 were investment sales and 2 were user sales. The prices achieved were in the range of $134 PSF – $428 PSF, with an average building size of 117,935 SF and an average price of $251 PSF.
165 Tycos Drive, North York

GTA Central Markets (North York)
Properties Leased between April 2021 – June 2021, from 20,000 SF plus

In the North York Sub Market, 11 properties were leased (totalling 488,372 SF) in Q2 2021. The net rental rates achieved were from $7.50 to $14.95 PSF, with an average building size of 44,397 SF and an average net rental rate of $11.06 PSF. 
1460 Whitehorse Road, North York

GTA Central Markets (Etobicoke)
Properties Sold between April 2021 – June 2021, from 20,000 SF plus

In the Etobicoke Sub-Market in Q2 2021, a total of 9 properties were sold (totalling 1,127,065 SF); 4 were investment sales and 5 were user sales. The prices achieved were in the range of $90 PSF – $279 PSF, with an average building size of 125,229 SF and an average price of $197 PSF.
77 Belfield Road, Etobicoke

GTA Central Markets (Etobicoke)
Properties Leased between April 2021 – June 2021, from 20,000 SF plus

In the Etobicoke Sub Market, 5 properties were leased (totalling 255,884 SF) in Q2 2021. The net rental rates achieved were from $6.50 to $10.35 PSF, with an average building size of 51,176.80 SF and an average net rental rate of $8.66 PSF. 
1000 Martin Grove Road, Etobicoke
What Lies Ahead:
  1. Rental Rates: We have seen a further increase in net rental rates 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: 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 still somewhere between 4.5% to 4.75% 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 4%. 
  3. Development Opportunities: Looking across the Toronto-Central markets, there is still great interest from developers to purchase infill sites and redevelop older and obsolete industrial buildings to newer, modern distribution centres. Given its central location and proximity to major highways and labour, larger industrial sites in the Toronto-Central markets will continue to be in great demand.

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 25 years.

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

Over the past 27 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 is a leading global real estate services firm that delivers exceptional value by putting ideas into action for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with 48,000 employees in approximately 400 offices and 70 countries.

In 2017, the firm had revenue of $6.9 billion across core services of property, facilities and project management, leasing, capital markets, advisory, and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.

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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