Q3 2020 Insight, Toronto-Central Markets

Establishing True Valuations Across Differing Markets 

October 23rd, 2020


This has been the second quarter operating under COVID-19 and the resulting economic shutdowns. Obviously, events had a big impact on commercial real estate across the board, but it looks like, on the surface, that it wasn’t as tough on industrial. In fact, the growing trend of e-commerce has pushed industrial demand to new highs.

Both warehousing and logistics, as well as cold-storage users have been snapping up space and creating an even more competitive environment. Having said that, our statistics show a relatively slight increase in the availability rate in Q2, going from 1.5% to 1.6%, and with positive absorption of 1,299,189 SF. 

Key Takeaways from Q3 2020

  • Availability Rate increased from 1.5% to 1.6%, with a lease availability rate of 1.2% and sale availability rate of 0.3%;
  • We had 1,792,278 SF under construction; 
  • We had absorption of 1,299,189 SF; 
  • Weighted average asking net rent was $9.11 PSF with additional rent of $3.54 PSF; and the
  • Weighted average sale price was $182.56 PSF.

Interesting Announcements this Quarter 

Industrial Redevelopment, QuadReal proposed to Redevelop Campbell Soup Factory

An application for Site Plan Approval has been submitted to the City of Toronto for the redevelopment of 60 Birmingham Street, Etobicoke.

QuadReal Property Group, with Weston Consulting as planners and designed by Ware Malcomb Architecture, the project consists of three one-storey industrial warehouse buildings totaling approximately 400,000 SF that will replace eight smaller industrial buildings that collectively served as the former Campbell Soup Factory. Construction is set to begin in 2021, with completion scheduled for 2022. 


Building 1 Birmingham Street frontage rendering, image retrieved from Ware Malcomb

The total area of the industrial lot spans some 18.80 Acres and will accommodate approximately 377,770 SF of industrial ground floor area and 20,000 SF of office space across all three buildings. Building 2 and Building 3 will be connected by a corridor on site’s eastern frontage along Dwight Avenue. Buildings 2 and 3 will occupy 120,663 SF and 119,393 SF of ground floor area respectively, with Building 1, a slightly larger structure, at 157,702 SF.

Overall site plan of Buildings 1, 2, and 3, image retrieved from Ware Malcomb
While the site is neither a designated nor listed as a heritage property on the City of Toronto Heritage registry, a facade retention, rebuilding, and repair strategy is being proposed along the development’s Birmingham Street frontage to retain the original structure’s red brick facades that were built between 1930 and 1944.  

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 Industrial Market – Q3 2020



GTA Industrial Market Overview – Q3 2020 – Credit – Cushman & Wakefield ULC

Statistical Summary – GTA Central Markets (Toronto, North York, Etobicoke & Scarborough), Q3 2020  

So let’s take a closer look at how the different Toronto Central Markets performed during Q3 2020…

GTA Central Markets (Scarborough)
Properties Sold between July 2020 – September 2020, from 20,000 SF plus  

In the Scarborough Sub-Market in Q3 2020, a total of 1 property was sold 

30 Emblem Court, Scarborough

GTA Central Markets (Scarborough)
Properties Leased between July 2020 – September 2020, from 20,000 SF plus

In the Scarborough Sub-Market in Q3 2020, a total of 5 properties were leased (440,895 SF). The net rental rates achieved were from $7.95 – $10.25 PSF, with an average building size of 88,179 SF and an average net rental rate of $9.43 PSF. 

75 Venture Drive, Scarborough

GTA Central Markets (North York)
Properties Sold between July 2020 – September 2020, from 20,000 SF plus  

In the North York Sub-Market in Q3 2020, a total of 12 properties were sold (519,542 SF); 5 user sales, and 6 investment sales. The prices achieved were in the range of $62 – $263 PSF, with an average building size of 43,295 SF and an average price of $177 PSF. 

4040 Chesswood Drive, North York

GTA Central Markets (North York)
Properties Leased between July 2020 – September 2020, from 20,000 SF plus

In the North York Sub Market, 6 properties were leased (totaling 204,753 SF) in Q3 2020. The net rental rates achieved were from $7.00 – $16.95 PSF, with an average building size of 34,126 SF and an average net rental rate of $9.92 PSF. 


15 Leswyn Road, North York

GTA Central Markets (Etobicoke)
Properties Sold between July 2020 – September 2020, from 20,000 SF plus  

In the Etobicoke Sub-Market in Q3 2020, a total of 4 properties were sold (329,375 SF); 3 were user sales and 1 investment sale. The prices achieved were in the range of $140 – $257 PSF, with an average building size of 82,344 SF and an average price of $193 PSF.

37 Bethridge Road, Etobicoke

GTA Central Markets (Etobicoke)
Properties Leased between July 2020 – September 2020, from 20,000 SF plus

In the Etobicoke Sub Market, 4 properties were leased (totaling 257,875 SF) in Q3 2020. The net rental rates achieved were from $6.40 – $9.77 PSF, with an average building size of 64,469 SF and an average net rental rate of $8.12 PSF. 

60 Shorncliffe Road, Etobicoke

What Lies Ahead:

  1. Rental Rates: Not all real estate is created equal…. It is important to note that the Industrial asset class has weathered the storm well so far and has come out strong, if not stronger than before… with the only exception potentially being small-bay properties. Increases in online retail and grocery sales, moving away from “just in time” inventory, and relocating parts of manufacturing back to Canada from overseas (and including the production of PPE equipment) will continue to put pressure on industrial markets; keeping our rental rates steady and increasing, although maybe at a slower pace. Overall, we are still in a Landlord’s market and have a long way to go….
  1. Property Values: Multi-tenant industrial properties that are owned by private equity funds (and are highly leveraged) may see some difficult days ahead… we may see vacancy rates increase and maybe even CAP rates as well…..  However, larger, single-tenant, logistics, warehouses and distribution facilities, and even manufacturing, should keep their values.
  1. Development Opportunities: There is not much land to be developed in the Toronto-Central Markets so we will continue to see infill redevelopment… 

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 vacancy rates, rental rates, and valuations having hit all-time highs right before COVID-19 took place, there may be plenty of opportunities to find creative solutions; whether it be through rightsizing, refinancing, bridge financing, sale-leasebacks, or otherwise.

While there may exist challenges in execution, Buyers are ever more hungry for product. Local, high-net-worth developers and investors are often active in bottom-of-market conditions. And well-capitalized institutional investors and pension funds are still willing to take a look at a deal if the numbers make sense.

Furthermore, a number of our clients are considering sale-leasebacks to re-capitalize their operations.

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.

Goran is currently serving as Immediate Past President of the SIOR ‐ Society of Industrial and Office Realtors, Central Canadian Chapter.

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
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

Newsletter

Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!