A Concert Properties fund has acquired majority ownership of its second Ontario Amazon distribution centre – a 519,000-square-foot purpose-built facility in the Greater Toronto Area – from developer Broccolini.
Amazon has signed a 15-year lease at the new Whitby-based distribution centre that’s now 90 per cent owned by Concert Properties’ CREC Commercial Fund LP. It was developed by Montreal-based Broccolini, which will retain a 10 per cent equity stake.
The facility features 36-foot clear-height ceilings and is billed as a robotics sortation centre: Amazon invested in adding a mezzanine for automation purposes. Andrew Tong, chief investment officer for Concert Real Estate Corporation and Concert Properties, told RENX the facility is one of several similarly equipped buildings in Amazon's network nationwide.
A request for proposal conducted by Broccolini on Amazon’s behalf is what determined Whitby would be the ideal site for the operation.
“They landed around this location after an exhaustive search,” said Tong, who’s also the managing director of the CREC Commercial Fund LP.
“The tenant has invested and put in a . . . mezzanine level, where there’s robotics in it. It’s not part of the leasable area but they have done that. That is significant because it allows it to become one of the best-in-class distribution robotics sorting centres in Canada.”
Concert, Broccolini, Amazon and the Whitby facility
Concert, Broccolini and Amazon also have an existing relationship.
The CREC Commercial Fund LP acquired a 90 per cent stake in a million-square-foot facility in Ottawa, which was also purpose-built for the global e-commerce giant, back in 2019.
The two-month-old Whitby facility was built in such a way that, should a tenancy expire, the configuration is demisable and can accommodate different configurations, he added.
“Developers now have to adapt, and we’re attracted to properties where they’re thinking ahead and thinking of long-term viability of the product to see if a building can be reused, reconfigured in the future, and it has here.”
This facility’s value is derived as much, if not more, from what’s outside the walls. It is strategically located in proximity to the eastern GTA’s highway system that includes Highways 401, 412 and 407 — a $2.2-billion eastern expansion of the latter route is now complete.
That is significant because it will allow delivery of goods in an an expeditious fashion and it also unlocks a deep labour pool, Tong said.
“Clearly, this area is seeing significant growth and investment, and especially in the highway system that allows trucks to come in and out in a very speedy way, much more than it has before," he explained.
"So, because of these improvements it’s unlocked the labour pool here, where you can get labour from Scarborough, Markham and Vaughan all within an hour, and you can develop real estate that caters to tenants who want larger square footage for their operations.
“It’s not just the workers - it’s also the consumers because now you have an improved highway system that allows for the movement of goods much quicker and there are seven million consumers within an hour’s drive of this facility.”
Amazon signed to long-term lease
Particularly notable about the facility, which is located at 5185 Gerrard Rd., just a quick jaunt from Highway 401, is that the lease term is a standard 15-year pact, not the three- to five-year deals most industrial landlords have insisted upon in recent years in a bid to capitalize on surging rental rates.
Although the lease structure was already in place before Concert Properties purchased the majority interest from Broccolini, a heavy-hitting tenant like Amazon will ensure stability for years ahead, Tong noted.
The lease also has built-in rent escalations throughout its duration.
“That gives us the ability to capitalize on changing rents over the period of time, but it has a long-term anchor for our investment,” Tong said.
Helping rental rates increase in the area – in addition to the sub-one per cent vacancy rate across the Greater Toronto Area – is that substantial infrastructure investment has already been earmarked for Whitby and the surrounding area.
In nearby Bowmanville, the Darlington Nuclear Generating Station, which powers about a fifth of Ontario’s power needs and is considered among the world’s safest nuclear stations, is in the process of being refurbished.
Metrolinx has also devoted around $1 billion to expand the region's mass transit capabilities to the east.
“What’s really happening with this asset is, it’s the first asset we’ve purchased in the GTA east,” Tong said.
“What drew us here to the Durham Region is really a couple of things: the Town of Whitby is one of the fastest-growing communities in the GTA with significant population growth, but there’s also significant infrastructure investments that have been put into the region.”