Perimeter Development and Crestpoint Real Estate Investments plan to develop new industrial product on the former Budd Automotive lands in Kitchener. (Courtesy CBRE)

Industrial land acquisitions and development continue at nearly breakneck speed in Southwestern Ontario as prices and rents keep rising and pushing investors farther west from the Greater Toronto Area (GTA).

“Volumes are very, very high relative to historical numbers,” Joe Benninger, vice-president with CBRE’s Southern Ontario investment team, told RENX. “It’s extremely tight out there. In 2021, the vast majority of opportunities, both large and small, were gobbled up.”

According to CBRE, 12,496 acres of industrial, commercial and investment (ICI) and agricultural land worth $837 million traded hands in Waterloo Region, Wellington County and Brant County last year. That’s 95 per cent more than in 2020.

EDITOR’S NOTE: This is the first of two articles on the industrial development boom in SW Ontario. Part II focuses on activity around the Hamilton airport.

Benninger said in Waterloo Region, lands came on stream after a long period of no new serviced land being available, a major reason for the dramatic jump.

“There are lands that have come on stream in the Sportsworld/Maple Grove area of Kitchener and Cambridge that were a very long time coming. There are more lands downstream that are in the official plan. The planners need to figure out a way to accelerate getting those serviced.”

Waterloo Region industrial land deals

Major industrial land deals that took place in Waterloo Region last year included:

– Broccolini purchasing an aggregate of 105 acres on Old Mill Road and Allendale Road in Cambridge for $55.24 million from different sellers;

– Crestpoint Real Estate Investments Ltd., in partnership with Perimeter Development Corporation, purchasing a 38-acre site that was part of the former Budd Automotive lands at Homer Watson Boulevard and Bleams Road in Kitchener for $21.15 million;

– office and health-care furniture designer and manufacturer Krug acquiring a 23.7-acre site on Pearson Street, which was also part of the former Budd Automotive lands, for $14 million;

– and Dream Industrial REIT acquiring a 28.5-acre site on Maple Grove Road for $26 million.

Benninger said numerous potential tenants are competing to land space in Crestpoint and Perimeter’s project, where existing buildings were torn down to make way for new construction.

“That’s indicative of most of these planned developments. They’re leased up before a shovel ever hits the ground.”

The price for the Dream acquisition was almost $1 million an acre.

“Those are lands that could have been bought at any time over the last decade or so, probably for about $500,000 an acre,” said Benninger. “They certainly had interest, but no one stepped up to the plate to meet the seller’s expectations. In 2021, the seller ran a marketing process and ended up with five or six bids and achieved just under $1 million (an acre) for them.

“I think you’ll see Dream service those lands and move forward with some development there. That site’s a little bit challenged in terms of its shape. It’s not the perfect shape and size, so it probably would have gone for more than that if it was.

“There are (also) other parcels in that area where you’ll see some other groups move forward with development.”

Land prices and rents continue to climb

The price of ICI land in Southwestern Ontario has traditionally been a bargain compared to the GTA, but it’s been rising quickly as a result of surging demand.

While industrial land prices drop west of Toronto, Benninger said properties have still sold for more than $2 million an acre in Milton and for $1 million-plus further west. He expects prices will continue to rise.

“Institutional industrial developers are buying for both short- and longer-term pipelines for construction,” said Benninger. “The underlying fundamentals for industrial throughout Southwestern Ontario really make it favourable for industrial development and construction.”

Waterloo Region’s construction pipeline is expanding and new buildings are slated for development, including iPort Cambridge, a 300-acre logistics and industrial campus which will deliver more than four million square feet across several phases.

Brantford, which offers good accessibility to the GTA and Hamilton, has seen considerable industrial development activity as well.

Two Fiera Real Estate funds acquired five industrial buildings comprising about 940,000 square feet of space in Brantford for about $118 million from local developer and property manager Vicano Construction Ltd. last spring.

The properties ranged in size from about 12,000 square feet to a 530,000-square-foot, one-tenant distribution centre completed in 2020.

Vicano continues to build industrial facilities in Brantford and has more land in the city and elsewhere in Southwestern Ontario where it can construct future projects.

All of this new development activity still isn’t enough to meet demand, however, and very low availability rates in Southwestern Ontario continue to drive industrial rents up.

“We’re seeing industrial rents right now of $12 (a square foot) and even higher,” said Benninger. “Given the lack of trading space, I think there’s still upward pressure on rents and they’ll continue to increase.”