While its findings don’t come as a surprise, Avison Young’s Q2 2022 Greater Toronto Area (GTA) industrial report clearly illustrates just how hot the market is.
High demand and limited supply continue to dominate, as the record low 0.9 per cent availability rate held steady despite the delivery of new buildings – because 84 per cent of that space was leased prior to completion. The availability rate has declined steadily from the first quarter of 2010 when it was 7.1 per cent.
Buildings under construction equate to 1.7 per cent of the GTA’s existing industrial stock, with 36 per cent being design-build projects and the remainder speculative developments.
Pre-construction developments total 50 million square feet in 143 buildings across the GTA. The GTA West market leads the way with 62 per cent of pre-construction opportunities, followed by 20 per cent in the North and nine per cent each in the Central and East markets.
These market conditions obviously favour landlords and rental rates rose 11 per cent quarter-over-quarter to $15.09 per square foot. Rents have risen 79 per cent in the past three years and 135 per cent in the past five.
GTA Central industrial market
Available space in the GTA Central market — comprised of East York, Etobicoke, North York, Scarborough and Toronto — increased by 10 basis points quarter-over-quarter to 0.9 per cent. It was down 50 basis points year-over-year.
Availability ranged from a high of 1.4 per cent in Toronto to a low of 0.5 per cent in North York.
The average asking net rental rate increased by $2.25 per square foot to $15.27 during the quarter. Toronto commands the highest rents at $16.67 per square foot and East York has the lowest at $14.74.
Brimich Logistics & Packaging Inc. signed a lease for 367,500 square feet at 1330 Martin Grove Rd. in Etobicoke, while BrokerHouse Distributors Inc. signed on for 57,000 square feet at 31-35 Leading Rd. in Etobicoke and EMCO Corporation took 55,300 square feet at 133 Bridgeland Ave. in North York.
Five buildings totalling 955,100 square feet of completely leased space were completed during the quarter, including the aforementioned 1330 Martin Grove Rd. and Prologis’ 130,500-square-foot speculative building at 3825 McNicoll Ave. which has been occupied by DHL.
There are 10 buildings under construction, totalling 1.9 million square feet, with 55 per cent in Etobicoke and 45 per cent in Scarborough. There are 32 buildings totalling 2.8 million square feet in the pre-construction stage.
With strong demand for online grocery orders and few last-mile warehouse options in the core, Walmart Canada has repurposed 20,000 square feet in its store at 1900 Eglinton Ave. E. in Scarborough to accommodate a state-of-the-art fulfillment centre that will be able to process 1,200 online orders per day for customers in downtown Toronto.
GTA East industrial market
The GTA East market — comprised of Ajax, Oshawa, Pickering and Whitby — saw its availability rate rise 40 basis points to 0.9 per cent while the average rental rate broke the $12 barrier for the first time, reaching $12.30 per square foot.
That’s still well below the GTA overall average of $15.09.
Forgestone Capital purchased two vacant buildings totalling 411,000 square feet on 14.7 acres at 144 First Ave. in Oshawa from First Oshawa Holdings for $52.5 million. Hanet Plastics sold 40,000 square feet at 10 Stanley Ct. in Whitby for $10.2 million.
The other major occurrence in the market during the quarter was the Port of Oshawa receiving $14 million from the federal government and $16 million from The Hamilton-Oshawa Port Authority to support the expansion and modernization of its facilities.
GTA North industrial market
The industrial availability rate in the GTA North market — comprised of Aurora, Markham, Newmarket, Richmond Hill and Vaughan — dropped 10 basis points to 0.5 per cent during the second quarter. The average asking net rental rate rose to $15.45 per square foot, led by Vaughan at $16.09.
Dream Industrial REIT acquired an 86,000-square foot structure on four acres at 60 E. Beaver Creek Rd. in Richmond Hill for $30 million.
Six buildings totalling 708,800 square feet were completed during the quarter, the largest a 287,300-square-foot building owned by Berkshire Axis at 11050 Woodbine Ave. in Markham that’s fully leased to GoBolt.
At the end of the quarter, 16 buildings totalling 3.4 million square feet were under construction. Sixty-five per cent of the space was pre-leased and 80 per cent of it was in Vaughan.
There were also 30 buildings at the pre-construction stage with the potential to add almost 10 million square feet to the market. Thirty-six per cent of that space has been leased prior to construction.
GTA West industrial market
The industrial availability rate in the GTA West market — comprised of Brampton, Burlington, Caledon, Halton Hills, Milton, Mississauga and Oakville — increased by 10 basis points to 1.1 per cent during the quarter. Average asking net rents increased to $14.84 per square foot.
Pet Valu signed a new lease for 670,500 square feet at 10750 Hwy. 50 in Brampton, while Chrysler took 513,500 square feet at 100 Edgeware Rd. in Brampton, ASL Global Logistics leased 314,200 square feet at 2175 Cornwall Rd. in Oakville and Canadian Hospital Specialties Ltd. signed on for 188,800 square feet at 1213 International Blvd. in Burlington.
Crestpoint Real Estate Investments Ltd. bought an 883,900-square-foot building on 53 acres at 100 West Dr. in Brampton for $244 million. Crestpoint and sole tenant Owens Illinois Inc. signed a 10-year sale/leaseback agreement for the building.
Divco purchased 98,000 square feet at 3350-3370 Wolfedale Rd. in Mississauga for $53.83 million from Rockett Realty.
Seven buildings totalling 789,100 square feet were completed in the quarter and 57 per cent of the space was leased. The largest was a 278,100-square-foot warehouse owned by Moldenhauer at 759 Winston Churchill Blvd. in Mississauga.
There were 8.6 million square feet, 35 per cent of it leased, across 32 buildings under construction at the close of the quarter. That accounts for 57 per cent of the overall construction pipeline in the GTA.
Mississauga is responsible for the largest share of that space with 37 per cent, followed by Brampton with 29 per cent and Milton with 18 per cent.
Another 71 buildings totalling 31 million square feet are in the pre-construction phase.