Q3 2021 Insight, Toronto-North Markets

Establishing True Valuations Across Differing Markets 

November 12th, 2021

“Only when the tide goes out do you discover who’s been swimming naked.”

  • Warren Buffett

In good times, we are faced with an abundance of opportunities to grow and prosper. In the context of commercial real estate, this could mean investing in facilities for our operations, developing land to construct new buildings, or acquiring and leasing out properties.

Savvy investors and business operators always perform due diligence throughout the decision- and deal-making processes. However, in a strong and active market, there is relatively less uncertainty, and thus, less risk. Making moves is much more straightforward as there are more options to consider, with outcomes easier to predict and to forecast.

As we head towards winter, we find ourselves in a position fraught with question marks. Assumptions are being questioned and redefined. The underlying industrial market in the GTA is in an extreme imbalance, with many players chasing scarce inventory of land and properties. As a result, pricing is at all-time highs. And once secured, these assets are subject to economic forces, which themselves are far from normal.

Labour and material shortages (and cost inflation) continue to plague developers, who are working to orchestrate and time the construction process as they apply for permits and zoning – which have also been delayed. Industrial occupiers also feel the pinch as their leases renew or they look to expand. Nothing is guaranteed. And success comes at a premium.

Those who planned well in advance are reaping the rewards of having assets in place or the capacity to take on new business and more projects. Those who moved in reaction – or who were slow to adapt – are looking for new strategies to position themselves for the future.

Patience and readiness have become virtues for the modern GTA CRE professional. The patience to wait for opportunities. And the readiness to act upon them.

The current state will only continue to grow more competitive, with product harder to find.

Key Takeaways from Q3 2021 – Toronto North Markets

  • The availability rate decreased from 0.9% to 0.7%, with a lease availability rate of 0.7% and a sale availability rate close to 0% (4,631 SF out of 156M SF of inventory);
  • We had 193,320 SF of construction completed and 3,733,982 SF still under construction; 
  • We had absorption of 398,770 SF;
  • The weighted average asking net rent increased from $12.78 to $12.40 PSF with additional rent of $3.96 PSF; and the
  • Weighted average asking sale price was $343.10 PSF, although there is almost no existing 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, Aurora, Newmarket)

Statistical Summary – GTA North Markets – Q3 2021 

Q3 2021 GTA Industrial Market Overview – Source: Cushman & Wakefield

Q3 2021, Industrial Market Overview – Source: Cushman & Wakefield
So let’s take a closer look at how the different Toronto North Markets performed during Q3 2021…

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

In the Vaughan submarket in Q3 2021, a total of 5 properties were sold (323,476 SF); 3 were investment sales and 2 were user sales. The prices achieved were in the range of $261 PSF – $400 PSF, with an average building size of 64,695 SF and an average price of $341 PSF. 

126 Edilcan Drive, Vaughan
GTA North Markets (Vaughan)
Properties Leased between July 2021 – September 2021, from 20,000 SF plus
In the Vaughan submarket, 4 properties were leased (totalling 330,376 SF) in Q3 2021. The net rental rates achieved were from $11.95 PSF – $14.75 PSF, with an average building size of 82,594 SF and an average net rental rate of $13.16 PSF. 

113 Viceroy Road, Vaughan
GTA North Markets (Markham/Richmond Hill)
Properties Sold between July 2021 – September 2021, from 20,000 SF plus  
In the Markham/Richmond Hill submarket in Q3 2021, a total of 9 properties were sold (452,744 SF); 2 were user sales and 7 were investment sales. The prices achieved were in the range of $251 PSF – $399 PSF, with an average building size of 50,304 SF and an average price of $312 PSF.

61 McPherson Street, Markham
GTA North Markets (Markham/Richmond Hill)
Properties Leased between July 2021 – September 2021, from 20,000 SF plus
In the Markham/Richmond Hill submarket, 2 properties were leased (totalling 41,291 SF) in Q3 2021. The net rental rates achieved were from $12.50 PSF –  $15.00 PSF, with an average building size of 20,645SF and an average net rental rate of $13.75 PSF. 

9133 Leslie Street,  Richmond Hill
GTA North Markets (Newmarket)
Properties Sold between July 2021 – September 2021, from 20,000 SF plus   
One property was sold in Newmarket in Q3 2021; a user sale. 

520 Cane Parkway, Newmarket
GTA North Markets (Newmarket)
Properties Leased between July 2021 – September 2021, from 20,000 SF plus
Two properties were leased in Newmarket in Q3 2021. The net rental rates achieved were in the range of $7.40 PSF – $11.35 PSF , with an average building size of 26,510 SF and an average net rental rate of $9.38 PSF. 

1135 Stellar Drive, Newmarket
What Lies Ahead:
  1. Rental Rates: The Toronto-North markets continue to have the highest weighted average rental rates at $12.40 PSF, followed by the West markets at $11.65 PSF and Central markets at $10.28 PSF. Keep in mind that rental rates are also subject to annual escalations. Despite a reported stabilization of net rental rates for deals completed in Q3 2021, we continue to see a general upward pressure 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: Only 4,631 SF of industrial space is currently reported for sale in the North markets; as close to 950,000 SF of space traded in Q3 2021. From this, we can see that 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: 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. 


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.

Industrial Real Estate Sales and Leasing, Investment Sales, Design-Build and Land Development

About Cushman & Wakefield ULC.
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 53,000 employees in 400 offices and 60 countries.

In 2020, the firm had revenue of $7.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com.

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.

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


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