Activity in the Greater Golden Horseshoe’s industrial sector has decelerated amid economic headwinds, but St. Thomas isn’t just bucking the trend, it’s on the cusp of a boom.
Since Volkswagen’s announcement in late April that St. Thomas will play host to its electrical vehicle "gigafactory" battery plant, which will create an estimated 3,000 direct jobs as well as thousands of more indirect jobs, players in the industrial sector have flocked to the municipality.
Demand for raw farmland is particularly high, said Diana Hoang, founder of Toronto-based Spear Realty, which is working with a couple of groups looking to establish a presence in St. Thomas.
“Looking at (land) trades from last year to this year, they’ve gone up significantly, and talking to vendors, their expectation is a lot higher when it comes to raw land,” Hoang told RENX.
“Everybody is anticipating land to be converted from actual farm lands to higher uses like industrial or residential to meet the demands of the new plant.”
Development land at a premium
Hoang said the Volkswagen announcement has been seismic.
The price per acre was $150,000 last year, but today it’s north of $400,000. Land already zoned for industrial is even scarcer and commands even higher per-acre prices. With the plant scheduled to open in 2027, there’s much more room for growth, she added.
“Pricing will still continue to grow because of the interest rates and the demand needed from all the smaller submarkets and smaller industries to accommodate a bigger automotive plant,” Hoang said. “It will definitely go up because you’ll see more users and more demand and it’s all about supply and demand.”
However, all things considered, the cost of land in St. Thomas is much cheaper than in the GTA, or even London where it’s over $1 million per acre.
Industrial prices determined by farmers
Brokers, representing clients in the industrial, residential and hospitality sectors, are approaching farmers to buy their land, and when successful, it’s costing a pretty penny.
One reason farmers are reticent to sell is their operating expenses, especially as they pertain to farming equipment, are so exorbitant that they will only sell for an astronomical price, Hoang said.
“For farmers, their problem is where do they go after this, because they need a lot of land,” she said, noting there are a myriad of other financial considerations for farm businesses including equipment and buildings, and access to other suitable property. “The cost to buy land does not outweigh (these) costs.”
However, a couple of residential subdivisions by Mapleton Homes and Palumbo Homes are already underway, and as St. Thomas grows in the years ahead, development economics across all asset types are expected to justify the rising land prices.
“Any kind of recycling companies, or any group that needs storage, any steel for massive buildings, will have to be stored somewhere,” Hoang said. “We’ll even see little users like welding or mechanical engineering companies, even HVAC; we’ll definitely see a little more in that area because they have to service the bigger industries.”
St. Thomas is open for business
London-based Dancor Construction had been looking to enter the St. Thomas industrial market in 2019, well before the Volkswagen EV battery plant announcement. One of the reasons is that the city’s planning department has a reputation for being easy to work with.
Sean Ford, general partner at Dancor, said the firm put in offers on properties in 2020 and 2021 which weren’t successful. However, it remains on the hunt.
“For the approval process part of it, St. Thomas is fantastic and that’s what generated our interest in looking at lands to develop there,” Ford said. “We got a sense we needed to hang on because something was going to happen and obviously it has.
"Now the focus is developing in and around the plant, and at some point developing on EV plant lands as well, because a lot of suppliers will want to go there.”
Along with Nexus REIT, Dancor is the largest landlord for new industrial buildings in London – which is about 15 kilometres from St. Thomas.
Ford maintains that, even without Volkswagen’s EV battery plant, St. Thomas’ industrial sector was poised to grow.
“We’re looking at St. Thomas and London as being one and the same,” he said. "In terms of a regional approach, when companies are looking to go there, they’re going to be looking for workforce — this is the most important part of everything — and proximity to the highway, and both St. Thomas and London are perfect on both those scores.”
Vicano building near VW property
In addition to developing industrial facilities, Vicano Developments Limited is a general contractor that had done some work for the City of St. Thomas. That’s when, according to vice-president Paul Vicano, Vicano began familiarizing itself with the local marketplace.
Today, Vicano owns five lots spanning 14 acres across the street from the VW plant on Dennis Road between Burwell Road and Highbury Avenue. Two of the lots already have industrial buildings on them.
Two more lots are slated for development before the end of the year.
“The price was attractive and we were hearing about the demand out in St Thomas for smaller-bay industrial,” Vicano said.
The VW plant is an added boon and not just for St. Thomas.
“There’s no doubt a large announcement like VW will bring with it ancillary-type industrial to the area, whether in London, south London or even eastward to Woodstock," Vicano observed. “We’re from Brantford and when Ferrero Rocher came, many smaller users came to service Ferrero and I see the same thing happening in St Thomas.
"It will bring industry to the area that will need industrial real estate to call their home.”