Q4 2020 Insight, Toronto-North Markets

Establishing True Valuations Across Differing Markets 

January 29th, 2021

Now that we have begun a new year, it feels like, in many ways, that we have passed not just a temporal marker but, also, a symbolic one.

While we work through some of the existing challenges in our day-to-day lives, there is cautious optimism surrounding the future.

In industrial real estate, in particular, we are seeing the re-invigoration of manufacturing industries while logistics and supply chain solutions merge into overall operations.

The past year has shown us all how important it is to have the ability to make, manage, and move goods efficiently and on-demand. The truth is, you need industrial space to achieve these objectives. 

The trend of e-commerce continues to push industrial demand to new highs. So far, much of the activity has come from big players such as Amazon. This year, we expect everyone else to join in as well.

Both warehousing and logistics, as well as cold-storage users have been snapping up space and creating an even more competitive environment… not only through the purchasing of commercial space but also through the acquisitions of entire companies and their portfolios.

Everything points towards another industrial rally. 

Key Takeaways from Q4 2020

• The availability Rate decreased from 1.8% to 1%, with a lease availability rate of 1.6% and a sale availability rate of 0.1%;
• We had 1,012,663 SF under construction; 
• We had absorption of 76,620 SF;
• The weighted average asking net rent decreased to $10.85 from $10.95 PSF with additional rent of $3.74 PSF; and the
• Weighted average asking sale price was $332.88 PSF. 

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 – Q4 2020  

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

GTA North Markets (Vaughan) 
Properties Sold between October 2020 – December 2020, from 20,000 SF plus  

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

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

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

GTA North Markets (Richmond Hill) 
Properties Sold between October 2020 – December 2020, from 20,000 SF plus  

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

1. Rental Rates: The Toronto-North markets continue to have the highest weighted average rental rates at $10.85 PSF, followed by the West markets at $10.46 PSF and Central markets at $9.68 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 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: The Toronto-North markets have the highest weighted average asking sale price in the GTA at $332.88 PSF followed by the West markets at $253.48 PSF. It really depends on the building 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 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