Q3 2020 Insight, Toronto-North Markets

Establishing True Valuations Across Differing Markets 

October 30th, 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 North Industrial Leasing Markets achieved the highest net rental rates among all markets across GTA at $10.95 PSF, with the City of Markham leading the pack with $11.33 PSF, and followed by Richmond Hill with $11.05 PSF.

On the sales side, the GTA North Industrial Markets also achieved the highest weighted average sale prices among all markets across GTA at $315.61 PSF, with the City of Richmond Hill leading the pack with $399.53 PSF, and followed by Vaughan with $323.04 PSF. 

Key Takeaways from Q3 2020

  • The availability rate is 1.8%, with a lease availability rate of 1.6% and a sales availability rate of 0.2%;
  • We had 1,293,360 SF under construction;
  • Weighted average asking net rent was $10.95 PSF, with additional rent of $3.81 PSF;
  • Weighted average sale price was $315.61 PSF.

Interesting Announcement this Quarter 

Amazon to open two new delivery stations in Vaughan

Amazon announced the opening of two delivery stations in Vaughan. Amazon recently opened a 209,000-square-foot station at 600 Tesma Way. A 193,000-square-foot facility will open in 2021 at 50 Keyes Court.

Delivery stations power the last mile of Amazon’s order fulfillment process. Packages are transported from fulfillment and sortation centres to delivery stations to be loaded onto delivery vehicles to reach the end customer.


50 Keyes Court, Vaughan

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 Industrial Market – Q3 2020

Q3 2020 GTA Industrial Market Statistics – 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 July 2020 – September 2020, from 20,000 SF plus 

In Q3 2020, a total of 4 properties (totaling 222,244 SF) were sold. The prices achieved were in the range of $218 – $306 PSF, with an average building size of 55,561 SF and an average price of $262.25 PSF. Three were investment sales and one was a user sale. 


67 – 83 Jacob Keffer Parkway, Vaughan

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

On the leasing side, a total of 11 properties (totaling 1,566,677 SF) were leased. The net rental rates achieved were from $7.25 – $14.25 PSF, with an average building size of 97,800 SF and an average net rental rate of $9.91 PSF. 


157 Rivermede Road, Vaughan

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

In Q3 2020, no properties were sold in Markham. 

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

On the leasing side, a total of 6 properties (totaling 221,199 SF) were leased. The net rental rates achieved were from $9.50 – $10.80 PSF, with an average building size of 36,867 SF and an average net rental rate of $9.87 PSF. 


60 Travail Road, Markham

GTA North Markets (Richmond Hill/Newmarket) 
Properties Sold between July 2020 – September 2020, from 20,000 SF plus 

In Q3 2020, a total of 3 properties (totaling 106,388 SF) were sold. The prices achieved were in the range of $176 – $245 PSF, with an average building size of 35,463 SF and an average price of $210.50 PSF. Three were investment sales and two were user sales. 


475 Edward Avenue, Richmond Hill

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

On the leasing side, a total of 2 properties (totaling 111,905 SF) were leased. The net rental rates achieved were from $9.75 – $8.95 PSF, with an average building size of 55,953 SF and an average net rental rate of $9.35 PSF. 

55 East Beaver Creek Road, Richmond Hill
What Lies Ahead:
  1. Rental Rates: 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 our 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: Development opportunities will continue to be available along Highway 400 north towards Bradford, such as WalMart’s new 550,000 SF distribution centre. In addition, hundreds of acres of new land for development is opening up alongside the GTA West Multimodal Transportation Corridor, which will connect the Highway 401/407 interchange in Milton to Highway 400 in King City.

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!