Greater Toronto Area
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Fourth Quarter Quarter 2019 2018 / Industrial / Industrial Market ReportMarket Report Greater Toronto Area Quick Stats Strong fundamentals underpinned the bringing the full-year tally to 33 buildings Greater Toronto Area (GTA) industrial market and 8.1 msf – compared with 36 buildings through 2019, continuing the success of (6 msf) completed in 2018. Meanwhile, 1.4% 2018. Steadily declining availability, rapidly almost 15 msf remained under construction Availability rate in the Greater increasing rental rates and a growing GTA-wide and, barring any delays, could Toronto Area number of new building completions were push the full-year 2020 total to more than all prominent factors throughout the year. 10 msf – a decade high. However, limited developable land impacts Average rent for industrial product ended $9.00 psf the speed and cost of construction activity, the fourth quarter and 2019 having reached Average asking net rent in the hindering delivery of much-needed new the $9-per-square-foot (psf) mark for the Greater Toronto Area supply. To protect against the increasingly first time. This represents an increase of landlord-favouring conditions, tenants 23% year-over-year – rates have jumped are seeking creative lease solutions and 34% from three years ago, and 51% in the 10 ownership positions. past five years. Speculative construction Properties in the Greater Toronto Lease renewals and sale-leasebacks were continues to moderate the pace of Area with more than 250,000 sf popular during the quarter – notably DSV declining availability in the face of strong available – down from 11 one year Logistics’ distribution centre (DC) (1.1 million tenant demand, notably for logistics space. ago square feet (msf)) in Milton and Sobeys In a landscape defined by economies (794,000 square feet (sf)) in Vaughan. of scale, 1-msf facilities are becoming Demand for e-commerce fulfilment centre widespread in the GTA. With the completion 14.7 msf space continued as Amazon pushed into of DSV’s 1.1-msf DC in Milton, the region the East market – inking a 354,000-sf lease GTA-wide industrial space under is now home to 10 industrial buildings of in an existing facility in Whitby on the heels construction – up from 8.5 msf one a million square feet or more. Meanwhile, year ago of its third-quarter 1-msf design-build deal Canadian Tire broke ground on a 1.3-msf in Scarborough, adding to its growing facility at 10254 Hurontario St. in Brampton number of GTA locations of various sizes. for its FGL Sports division, while Bombardier 23% Despite 6.2 msf of completions in the fourth announced plans for a 1-msf project for quarter, availability held steady quarter- its global jet manufacturing business near Net asking rent growth year-over- year in the Greater Toronto Area over-quarter at 1.4%. The newly completed Pearson International Airport during the space spanned 20 buildings across the GTA, quarter. Partnership. Performance. avisonyoung.ca Greater Toronto Area Fourth Quarter 2019 / Industrial Market Report GTA Market Monitor Q4 2019 QoQ The overall industrial availability rate held charge, commanding an average of 883 msf steady at 1.4% – pausing at an all-time $10.79 psf – smashing the ten-dollar Inventory low reached in the third quarter, but mark for the first time – led by Richmond down 30 bps year-over-year. Despite Hill and Vaughan, both of which broke 12.3 msf construction completions in excess the $11-psf mark during the quarter. By Available Area of 6 msf, there was little to no effect comparison, the GTA East market is a upon overall availability as the majority bargain with average rents at $7.29 psf, $9.00 psf of new space had been preleased. remaining the only GTA market with a Average Net Asking Rental Rate Quarter-over-quarter, availability in the sub-$8 overall average asking rent. GTA West market held steady at 1.5%, 14.7 msf / 65 buildings while the Central and North markets Fourth-quarter completions totaled 6.2 Under Construction reported marginal increases of 20 and msf across 20 buildings, with Caledon 10 bps, respectively. GTA East was the contributing the largest proportion (1.9 only market where availability declined msf). A further 65 buildings (totaling 14.7 Availability Trends (60 bps), as Amazon leased 354,000 sf in msf) were under construction, mostly 20 5% Whitby – the largest new deal during the in GTA West (58%). An additional 115 buildings were in preleasing mode, with 4% fourth quarter and the company’s first Availability Rate Availability the potential to add more than 42 msf 3% foray into Durham Region. 10 across the GTA if built. This is a significant 2% Deal velocity is widespread, with a increase compared with year-end 2018, 1% Total Available Area (msf) Area Available Total significant proportion of larger deals when 68 buildings totaling 24 msf were 0 0% Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 resulting from renewals and sale- in the preleasing pipeline. Direct Available Area (sf) Sublet Available Area (sf) Availability Rate (%) leasebacks. In total, five leases in excess of 250,000 sf were signed, including Occupancy Cost Trends the aforementioned deals by DSV $14 and Amazon, as well as: Indigo Books $12 & Music (610,300 sf / renewal) at 100 $10 Alfred Kuehne Blvd. in Brampton; Estee $8 Lauder Cosmetics (373,500 sf / renewal) $6 at 550 Petrolia Rd. in North York; and $4 $2 Kraft Canada (345,000 sf / new) at 20 $0 Westbridge Dr. in Halton Hills. Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Avg. Net Asking Rate ($psf) Avg. Additional Rent ($psf) The average asking net rental rate in the GTA continued its upward trajectory in the fourth quarter, but accelerated at Number of buildings with 250,000+ sf a slower pace, rising $0.05 during the 10 available quarter to reach $9.00 psf for the first time. GTA North continued to lead the Inventory Direct Avail. Sublet Avail. Total Avail. Avail. Rate Avg. Net Asking Avg. Addt'l Rent Avg. Sale Price Current Under Contruction Preleasing Market (sf) Area (sf) Area (sf) Area (sf) (%) Rent ($psf) ($psf) ($psf) Completions (sf) (sf) (sf) GTA Central 256,045,691 3,306,758 293,674 3,600,432 1.4% $8.90 $3.50 $182 1,637,514 1,922,177 4,482,068 GTA East 50,755,283 495,654 127,474 623,128 1.2% $7.29 $3.35 $122 0 2,276,188 3,611,244 GTA North 186,827,310 1,953,261 258,329 2,211,590 1.2% $10.79 $3.79 $216 559,969 1,922,528 10,943,254 GTA West 389,246,886 4,408,308 1,437,078 5,845,386 1.5% $8.99 $3.45 $215 3,986,882 8,559,408 23,210,406 Greater Toronto 882,875,170 10,163,981 2,116,555 12,280,536 1.4% $9.00 $3.50 $199 6,184,365 14,680,301 42,246,972 Partnership. Performance. avisonyoung.ca Greater Toronto Area Fourth Quarter 2019 / Industrial Market Report GTA Central Market Monitor Q4 2019 QoQ Available space in the Central market speculative build at 75 Venture Dr. 256 msf rose 20 bps quarter-over-quarter to Five buildings totaling 1.9 msf were Inventory 1.4% – the same figure reported one under construction – including year earlier. The average asking net Amazon’s fulfilment centre at 6351 3.6 msf rental rate closed the fourth quarter Steeles Ave. E. (1,023,000 sf) and Available Area and year at $8.90 psf – a drop of grocery chain Metro’s two new $0.34 (3.7%) quarter-over-quarter buildings: a complete redevelopment $8.90 psf – with Scarborough continuing to of its existing Etobicoke distribution Average Net Asking Rental Rate command the highest rents at $9.32 centre at 17 Vickers Rd. (540,000 psf. Availability shifted most notably sf) and new construction of a 1.9 msf / 5 buildings in Scarborough (up 50 bps to 1.7%), temperature-controlled facility at Under Construction while North York posted a 30-bps 170 The West Mall (209,500 sf). The decrease to 1.2% and continues preleasing pipeline increased to 4.5 to be popular with tenants and msf (seven buildings) – a mixture Availability Trends investors, thanks to its strong transit of speculative projects and those 5 5% infrastructure and diverse and dense awaiting a tenant. 4 4% labour pools. Availability Rate Availability With developable land extremely 3 3% The most notable fourth-quarter limited in the Central market, the bulk 2 2% lease transaction in the Central of new proposals result from creative 1 1% Total Available Area (msf) Area Available Total market was Estee Lauder Cosmetics’ reuse or complete redevelopment 0 0% renewal at 550 Petrolia Rd. for 373,500 of existing sites. The limited supply Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 sf. On the sales front, North Bridge and high cost of land may one day Direct Available Area (sf) Sublet Available Area (sf) Availability Rate (%) Investment purchased 1160 and justify multi-level developments 1170 Birchmount Rd. in Scarborough in the GTA in the years ahead. Occupancy Cost Trends (362,682 sf on 14.5 acres) for $45.5 Oxford Properties recently made $14 million, while SmartStop Self Storage the jump in Vancouver (a similarly $12 acquired 1120 Dupont St. (a five- land-constrained environment) $10 storey, 62,150-sf inner city self-storage with the announcement of Canada’s $8 facility) from Talus Capital for $34.3 first multi-level industrial project in $6 Avg.