Toronto region poised to benefit from a third industrial revolution

Contrary to the popular perception that North America is a continent with a declining manufacturing sector, forecasters say we are on the verge of a new industrial revolution that will require hundreds of millions of square feet of additional space.
“Work that Deloitte is doing, along with many others, indicates we are on the verge of an exciting time for manufacturing,” Deloitte director of real estate Antony Lorius (picture upper left) said at the Land and Development Conference in Toronto on May 28.
“The Economist calls it 'A third industrial revolution, back to making things.' ”
A steady flow of reports describing new processes such as 3D printing, nano technology, light weighting in the automotive sector and synthetic biology have many enthusiastically referring to a “seismic shift” in the manufacturing sector, according to the Deloitte executive.
Shifting cost structures, uncertainty over energy prices, supply chain risk and other issues are making traditionally low cost but distant producers less competitive and reigniting the North American manufacturing sector, he explained.
“We are seeing the re-shoring of U.S. and Canadian jobs with 300,000 in the U.S. and 25,000 in Canada, trends that are expected to continue,” Lorius said in his conference presentation.
Resurgence in the manufacturing sector is expected to spur development of up to 500 million square feet of additional industrial space in the Toronto metropolitan region by 2041.
Employment land concentrated in nodes throughout the GTA
The movement of people to their GTA workplace has undergone significant change.
“Talking about large metropolitan regions, there is often a perception that there is a central employment area surrounded with sprawling suburbs,” said Lorius. “The reality for us (in the GTA) is we moved away from that model a very long time ago.”
Analysis of traffic volumes between the 416 and the 905 show a flow of people in multiple directions throughout the region. Durham is the only regional municipality that still follows the traditional pattern of residents travelling to the city for work.
“On average, the relationship between 416 and 905 is much more balanced than originally thought,” said Lorius.
“The City of Toronto is no longer the centre of employment (in the region),” the Deloitte representative said. “There are at least three concentrations of employment land, around the airport in Mississauga, southern York region in the City of Vaughn in the Intermodal Yards, Commerce Valley in the City of Markham and the Town of Richmond Hill.”
If the metropolitan region is expanded to include Aurora, Barrie, Simcoe, Kitchener-Waterloo, East Gwillimbury, Newmarket and other communities outside the Toronto greenbelt, the trend is for the entire region to become economically integrated.
“Over time the employment concentrations that currently exist will strengthen and the economic integration of the region will only accelerate,” said Lorius.

Image prepared by Hemson Consulting Ltd. included in Antony Lorius presentation materials for NAIOP
Population growth and office space in the GTA
The population in the Greater Toronto Metropolitan area is expected to surpass 10 million by 2041, roughly the size of the Greater Chicago area. If the broader region is included, this threshold could be reached as early as 2021, according to Lorius.
Up to 70 million square feet of new office buildings will be added to GTA and the resurgence of the downtown Toronto office market that started in 2009 will continue for several years, according to Cushman and Wakefield.
The growth and distribution of new office space throughout the region is dependent on transit infrastructure investment.
The new industrial economy and real estate
Unlike the uncertainty associated with the location of new office space, the future location of industrial properties in the GTA is already known.
The City of Toronto is projected to experience a decline in industrial uses, and the 905 area is going to absorb most of the industrial growth.
“It is going to go in the well-located, competitive, vacant industrial business parks along the major highway corridors,” said Lorius.
However, for the Toronto region to benefit from the new industrial economy “a whole suite of initiatives is required to make it happen,” Lorius cautioned.
“Fundamentally it depends, particularly here (in the GTA), on having the transportation infrastructure to get goods to and from markets and along the supply chain.
“When I look at what is happening with manufacturing and when I look at the opportunities to improve performance through exports and I combine that with where we are in the broader context, it is clear to me there are absolutely tremendous opportunities awaiting for us and this is the real big impetus for transportation infrastructure improvements.”
The widening of the Panama Canal is nearing completion and trade through the Caribbean is projected to grow as a result. Expansion of ports on the U.S. coast and inland logistic centres will all contribute toward increased import and export activity in North America.
Poised to be benefit from the industrial revolution
The Greater Toronto Area and Hamilton is already one of the largest industrial areas in North America.
Combined with the region's integration with Detroit, the addition of a new International bridge and other factors poised to strengthen the Great Lakes industrial mega region, “Toronto is positioned to become an incredible winner within the North American continent,” said Lorius.
The need for transit infrastructure in the GTA captured headlines this week when Metrolinx announced its proposal for the Government of Ontario to implement a dedicated transit tax across the povince.
While it is essential that transit be improved in the GTA to capitalize on growth in the downtown, to spur intensification of the existing urban nodes and to bring about economic integration within the region, Lorius firmly believes that “from a strategy perspective we can’t lose site of the big picture.”
“If we look at the broader picture over time, I am hoping we can lift the road infrastructure back into the discussion” he concluded.







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