Q2 2021 Insight, Toronto-North Markets

Establishing True Valuations Across Differing Markets 

July 30th, 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

  • The availability rate decreased from 1.3% to 0.9%, with a lease availability rate of 0.8% and a sale availability rate close to 0% (40,000 SF out of 156M SF of inventory);
  • We had 189,250 SF of construction completed and 2,898,026 SF still under construction; 
  • We had absorption of 549,628 SF;
  • The weighted average asking net rent increased from $12.35 to $12.78 PSF with additional rent of $3.95 PSF; and there was
  • No applicable 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, Newmarket, Aurora)

Statistical Summary – GTA North Markets – Q2 2021  



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

So let’s take a closer look at how the different Toronto North Markets performed this quarter…

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

In the Vaughan sub-market in Q2 2021, a total of 3 properties were sold (255,485 SF); 2 were user sales and 1 was an investment sale. The prices achieved were in the range of $217 PSF – $250 PSF, with an average building size of 85,162 SF and an average price of $232 PSF. 
215 Drumlin Cricle, Vaughan

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

In the Vaughan sub-market, 16 properties were leased (totalling 674,676 SF) in Q2 2021. The net rental rates achieved were from $9.00 PSF – $14.75 PSF, with an average building size of 42,167 SF and an average net rental rate of $11.68 PSF. 
193 Jardin Drive, Vaughan

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

In the Markham sub-market in Q2 2021, a total of 7 properties were sold (309,662 SF); 6 were user sales and 1 was an investment sale. The prices achieved were in the range of $157 PSF – $365 PSF, with an average building size of 44,237 SF and an average price of $270 PSF.

7181 Woodbine, Markham
GTA North Markets (Markham)

Properties Leased between April 2021 – June 2021, from 20,000 SF plus

In the Markham sub-market, 6 properties were leased (totalling 375,518 SF) in Q2 2021. The net rental rates achieved were from $9.50 PSF –  $13.95 PSF, with an average building size of 62,586 SF and an average net rental rate of $11.73 PSF. 
120 Valleywood Dr, Markham

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

No properties were sold in Richmond Hill in Q2 2021.

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

In the Richmond Hill sub-market, 3 properties were leased (totalling 159,868 SF) in Q2 2021. The net rental rates achieved were from $9.75 PSF – $12.50 PSF, with an average building size of 53,289 SF and an average net rental rate of $11.58 PSF. 
123 Newkirk Rd, Richmond Hill

GTA North Markets (Aurora/Newmarket) 
Properties Sold between April 2021 – June 2021, from 20,000 SF plus

One property was sold in Newmarket in Q2 2021. No properties were sold in Aurora in Q2 2021. 

580 Steven Court, Newmarket
GTA North Markets (Aurora/Newmarket)
Properties Leased between April 2021 – June 2021, from 20,000 SF plus
Two properties were leased in Aurora in Q2 2021. The net rental rates achieved were in the range of $8.95 PSF – $12.00, with an average building size of 25,680 SF and an average net rental rate of $10.48 PSF. No properties were leased in Newmarket in Q2 2021.
205 Industrial Pkwy N, Aurora
What Lies Ahead:
  1. Rental Rates: The Toronto-North markets continue to have the highest weighted average rental rates at $12.78 PSF, followed by the West markets at $11.15 PSF and Central markets at $10.75 PSF. Keep in mind that rental rates are also subject to annual escalations. We have seen a further increase in net rental rates across the board further 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: While we don’t have an applicable weighted average asking sale price for the Toronto-North markets this quarter due to almost zero inventory, property values remain in line with the previous trend. This was shown by the average sales price for completed transactions. That being said, each building is unique, and it really depends on the size and location. 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: 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 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
www.siorccc.org

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

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