How Much Is Your Building Really Worth?

Establishing True Valuations Across Differing Markets 

Q3 2020 Insight, Toronto-East Markets

November 6th, 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. 

The GTA–East Industrial Markets are the smallest in the GTA with about 43,000,000 SF; just 5% of overall Industrial Inventory in the entire region.  

Key Takeaways from Q3 2020

• 1.822 Million SF was under construction;
• We had 734,295 SF of new supply;
• The overall vacancy rate was just 1.5% with 1.4% available for lease and 0.1% available for sale;
• Weighted average asking lease rate was $7.12 PSF; and the
• Weighted average sale price was $172.04 PSF.

Interesting Announcement this Quarter 

Amazon to open a new fulfillment centre in Ajax in 2021

At this new one-million-square-foot fulfillment centre, more than 1,000 employees will pack and ship large customer purchases such as sports equipment, patio furniture, fishing rods, pet food, kayaks, bicycles, and other household goods.

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-East Markets (Pickering, Ajax, Whitby & Oshawa)

Statistical Summary – GTA Industrial Market – Q3 2020

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

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

1. Rental Rates: Net rental rates in the GTA East markets are considerably lower than rates in the other GTA markets due to lower general land values. Despite this, increases in online retail 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 net rental rates steady and increasing, although maybe at a slower pace. Overall, we have seen an increase in net rental rates in Q3, and this trend is likely to continue…
2. Property Values: Property values are being pushed upwards given the low availability rate, great demand, and cheap cost of capital. Everyone is looking to acquire industrial real estate, which has weathered the storm better than any other asset class. We see buyers – users, occupiers, and investment funds – looking for industrial assets. Values will continue to appreciate accordingly.
3. Development Opportunities: We have 1.8M SF under construction in the GTA East Markets. New speculative construction is being delivered by a number of major developers such as Panattoni, Carttera, PIRET, and Crestpoint with Blackwood Partners.

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