Establishing True Valuations Across Differing Markets 

March 10th, 2023

Should every investor buy into the Southern Ontario industrial market?

And should every industrial property owner try to cash out at some of the strongest valuations we’ve ever seen (despite the hairiness of increased interest rates)?

Well, this begs the question if one should do anything ‘just because’ it is opportunistic and can be validated by the opinions and actions of others. To address the above questions: yes, one should, but if, and only if, one meets certain criteria.

At the end of the day, we are looking to manage returns and risk, and to do so in a way that aligns with our own personal preferences and long-term objectives. If all the proverbial boxes are ticked, then the question becomes, “how does one do it?”

And despite all of the data and intel at our fingertips, we are no doubt moving through uncharted waters. The ability to predict and insulate oneself from future shifts in the market through prudent management may be more top-of-mind now than speed-to-market or aggressive acquisitions and asset-banking.

Looking back at the momentous upswing in popularity of the GTA’s industrial market, making decisions on the way up is relatively simple. When market and economic fundamentals are good, we can at least rationalize our moves in knowing that we have an out (through selling) and that we can lock in new gains in rents or values – even if they are not at new watermark levels (i.e. leasing our property for $16 PSF net and missing out on a few potential extra dollars).

Today, however, strategy is everything. Finding value is more difficult. Being ready to pounce on opportunities will not only position you to grow in difficult times, but to cultivate greater returns when the economy strengthens once more.

How we do this, as was raised earlier, is twofold. Managing oneself and one’s portfolio, and carefully poring over inbound data and intelligence to quickly analyze, verify, and execute on deals that make sense for you or your organization.

So with that said, let’s examine how each of the Greater Toronto Area regions performed in Q4 2022, and where we expect the market to go moving forward.

Key Takeaways from Q4 2022 – Toronto West Markets
  • The availability rate was 1.1%, with a lease availability rate of 1% and a sale availability rate of 0.07%;
  • We had 3,707,761 SF of construction completed and 12,656,575 SF still under construction; 
  • We had absorption of 2,312,808 SF;
  • Milton/Halton Hills achieved the highest weighted asking net rental rates in Q4 2022 at $18.10 PSF, followed by Mississauga at $17.80 PSF and Brampton at $17.74 PSF;
  • The weighted average asking net rent increased from $15.78 to $17.52 PSF with additional rent of $4.13 PSF; and the
  • Weighted average asking sale price was $442.76.

Why are the GTA West Markets in such demand?

The GTA West Industrial Markets are by far the largest industrial markets in the GTA, representing about 46.5% of GTA Industrial Inventory, or about 378,330,483 SF. The GTA West Markets were very active this quarter, with more than 12,656,575 SF under construction and a flurry of lease and sale transactions completed. 

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-West Markets
(Mississauga, Brampton, Oakville, Milton, Caledon, Burlington & Halton Hills)

Statistical Summary – GTA West Markets – Q4 2022 


Q4 2022 GTA Industrial Market Overview – Source: Cushman & Wakefield
Q4 2022, Industrial Market Overview – Source: Cushman & Wakefield
So let’s take a closer look at how the different Toronto West Markets performed during Q4 2022…
GTA West Markets (Mississauga)
Properties Sold between October 2022 – December 2022, from 20,000 SF plus
Seven properties were sold in Mississauga in Q4 2022; 2 were investment sales, and 5 were user sales. The prices achieved were in the range of $310 PSF – $483 PSF, with an average building size of 49,661 SF and an average price of $408 PSF. 

450 Superior Blvd, Mississauga
GTA West Markets (Mississauga)
Properties Leased between October 2022 – December 2022, from 50,000 SF plus
A total of 15 properties over 20,000 SF were leased in Mississauga from October through December 2022. The net rental rates achieved were from $14.50 PSF – $21.25 PSF, with an average building size of 94,984 SF and an average net rental rate of $17.65 PSF.

3150 Derry Rd East, Mississauga
GTA West Markets (Brampton)
Properties Sold between October 2022 – December 2022, from 20,000 SF plus
A total of 9 properties were sold in Brampton in Q4 2022; all were investment sales. The prices achieved were in the range of $236 PSF – $444 PSF, with an average building size of 180,937 SF and an average price of $329 PSF. 

8495 Goreway Drive, Brampton
Portfolio Sale 
The TD Greystone – Pure Industrial Peel & Halton Industrial Portfolio 2022 consists of six properties in Peel and Halton. The portfolio was purchased for $428,000,000 and contains a gross leasable area of approximately 1,495,231 square feet, representing an aggregate price per square foot of $286.
GTA West Markets (Brampton)
Properties Leased between October 2022 – December 2022, from 20,000 SF plus
A total of 11 properties were leased in Brampton in Q4 2022. The net rental rates achieved were from $15.00 PSF – $21.00 PSF, with an average building size of 199,280 SF and an average net rental rate of $18.62 PSF.

100 Edgeware Rd, Brampton
GTA West Markets (Burlington)
Properties Sold between October 2022 – December 2022, from 20,000 SF plus
One property was sold in Burlington in Q4 2022; a 39,426 SF user sale. 

1149 & 1151 Heritage Road
GTA West Markets (Burlington)
Properties Leased between October 2022 – December 2022, from 20,000 SF plus
Two properties were leased in Burlington in Q4 2022. The net rental rates achieved were from $12.75 PSF – $13.75 PSF, with an average building size of 88,500 SF and an average net rental rate of $13.25 PSF.

777 Walkers Line, Burlington
GTA West Markets (Caledon/Halton Hills/Milton)
Properties Sold between October 2022 – December 2022, from 20,000 SF plus
Four properties were sold in Caledon/Halton Hills/Milton/Hamilton in Q4 2022; 2 were investment sales and 2 were user sales. The prices achieved were in the range of $239 PSF – $439 PSF, with an average building size of 199,130 SF and an average price of $333 PSF. 

95 Market Drive, Milton
GTA West Markets (Caledon/Halton Hills/Milton)
Properties Leased between October 2022 – December 2022, from 20,000 SF plus
Two properties were leased in Caledon/Halton Hills/Milton/Hamilton in Q4 2022. The net rental rates achieved were from $13.00 PSF – $16.00 PSF, with an average building size of 140,276 SF and an average net rental rate of $13.75 PSF.

8205 Parkhill Drive, Milton
GTA West Markets (Oakville)
Properties Sold/Leased between October 2022 – December 2022, from 20,000 SF plus
No properties were leased in Oakville in Q4 2022, while 2 properties were sold; both were user sales. The prices achieved were in the range of $131 PSF – $436 PSF, with an average building size of 36,939 SF and an average price of $284 PSF. 

2810 Coventry Road, Oakville
What Lies Ahead
  1. Rental Rates: We see many transactions achieving in excess of $16-$18 PSF net. We are also hearing that some of the current developments are increasing their price guidance to above $19-20 PSF net. That trend will continue.
  2. Property Values: The average weighted asking sale price for the GTA-West markets in Q4 2022 was $442.78 PSF. On one hand, and depending on the submarket, we would expect values to further increase due to the lack of available properties for sale. On the other hand, the economic uncertainty coupled with rising interest rates are beginning to cool the market as some investors opt to sit on the sidelines.
  3. Development Opportunities: In the fourth quarter of 2022, we had approximately 12.6 million square feet under construction in the GTA-West markets. This represents approximately 71% of all new development across the GTA (17.77 million SF), with the bulk of activity taking place in Brampton (3.9 MSF), Mississauga (3 MSF), and Milton/Halton Hills (2.6 MSF).  

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 30 years.

Goran Brelih is an Executive Vice President for Cushman & Wakefield ULC in the Greater Toronto Area.

Over the past 30 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.

Specialties:
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

Executive Vice President, Broker
Cushman & Wakefield ULC, Brokerage.
www.cushmanwakefield.com

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

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