Industrial Market Report / Third Quarter 2020 Greater Toronto Area Quick Stats Leasing activity in the Greater Toronto Area Average asking net rental rates, despite 1.9% (GTA) industrial market gained momentum economic conditions, reached a record- Availability rate in the in the third quarter of 2020, although the high $9.79 per square foot (psf) – up 3% Greater Toronto Area availability rate remained at 1.9% quarter- year-to-date, 48% from three years ago, over-quarter (though it was up 50 basis and 63% in the past five years. Despite the points (bps) year-over-year). Significant economic environment, rates continue activity in the GTA West market (the region’s to rise as landlords keep face rates intact $9.79 psf most prominent industrial sector) pushed while offering creative and flexible deal Average asking net rental rate availability down 30 bps during the quarter. terms. However, a shortage of premium in the Greater Toronto Area The full picture of demand for industrial mid- to large-bay space persists. space is not yet known as government assistance programs delay an inevitable The Government of Ontario is planning 9 return of space in select segments of a new 400-series highway, known as the “GTA West Multimodal Transportation Properties in the Greater the market. The number of building Toronto Area with more than completions during the quarter is evidence Corridor”, aimed at reducing travel times 250,000 sf available – down that construction activity has ramped back and supporting economic growth to from 14 one year ago up to pre-COVID-19 levels. Pent-up demand accommodate the growing population. is expected to sustain positive momentum Spanning Halton, Peel and York regions, for the industrial market into 2021. the project is in the planning stage with the preferred route close to being chosen 13.5 msf The second quarter’s steady pace of for a 50-km highway with 16 interchanges. GTA-wide industrial space leasing activity continued in the third. Notably, the highway will incorporate under construction – down from 19.5 msf one year ago Several significant deals were inked in the dedicated lanes for public transport third quarter including Amazon growing (transitway) and goods movement priority its presence by signing a design-build features (trucking lanes and infrastructure). deal for a 1.1-million-square-foot (msf) With vast tracts of undeveloped land 9.4% facility to serve the eastern GTA region. along this new corridor, the project Year-over-year growth in Demand from the food and beverage sector would create considerable real estate asking net rental rates in the continues with Brewers Retail (The Beer development opportunities. Read more Greater Toronto Area Store) taking 440,000 square feet (sf) at on this project from Avison Young here. HOOPP’s iPort development in Caledon. © 2020 Avison Young Commercial Real Estate (Ontario) Inc., Brokerage. All rights reserved. E&OE: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young. Greater Toronto Area Industrial Market Report / Third Quarter 2020 Q3 2020 QoQ GTA Market Monitor GTA North continued to lead the The overall industrial availability charge, commanding an average 891 msf rate across the GTA remained stable of $11.76 psf – led by Markham Inventory at 1.9% during the third quarter – and Vaughan at $11.29 and $12.07 50 bps higher than one year ago. psf, respectively. By comparison, Quarter-over-quarter, availability in the GTA East market is a bargain 16.5 msf the GTA West and Central markets with average rents at $7.66 psf, Available Area dropped by 30 bps to 2% and 10 remaining the only GTA market with bps to 1.8%, respectively, while the a sub-$8 overall average asking rent. $9.79 psf North and East markets reported Average Asking Net Rental Rate a marginal increase in availability Seventeen buildings reached of 20 bps to 1.6% and 10 bps to completion during the quarter, 1.7%, respectively. There was a totaling 3.2 msf – all almost fully 13.5 msf / 52 buildings noticeable uptick in deal velocity preleased (92% overall). GTA West Under Construction during the third quarter. This was and Central contributed a combined most noticeable in the large-bay total of 2.4 msf which included segment, when compared to the Amazon’s million-square-foot Availability Trends balance of 2020 thus far. Demand fulfillment centre in Scarborough. A further 52 buildings (totaling 20 5% continues to be driven largely by e-commerce, logistics and food and 13.5 msf ) were under construction 4% (65% leased), mostly in GTA West. Availability Rate beverage users – albeit slower than 3% normal, this was still respectable. In addition, 144 buildings were 10 in preleasing mode, with the 2% Companies also continue to renew in their existing space or extend potential to add more than 46 1% Total Available Area (msf) current leases for the short term, to msf across the GTA if built. This 0 0% is an increase of more than 11 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 allow for flexibility as the economy improves. Notable leases in the third msf compared with one year ago, Direct Available Area (sf) Sublet Available Area (sf) Availability Rate (%) quarter were design-builds with when 109 buildings totaling 35 msf expected delivery dates through were in the preleasing pipeline. Occupancy Cost Trends 2024 and included Amazon signing a deal for 1.1 msf at 300 Rossland Rd. $16 E. in Ajax. Walmart leased 550,000 $14 $12 sf at 11110 Jane St. in Vaughan for a $10 new distribution centre and Brewers $8 Retail (The Beer Store) signed $6 a deal for 437,500 sf at 12000- $4 12400 Coleraine Dr. in Caledon. $2 $0 The average asking net rental rate Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Avg. Net Asking Rate ($psf) Avg. Additional Rent ($psf) in the GTA continued its upward trajectory in the third quarter, but accelerated at a slower pace, rising $0.06 during the quarter to reach Number of buildings with a new high of $9.79 psf. Overall, 250,000+ sf rates rose by 1% quarterover- 9 available quarter and 9% year-over-year. Under Inventory Direct Avail. Sublet Avail. Total Avail. Avail. Rate Avg. Net Asking Avg. Addt'l Rent Avg. Sale Price Current Preleasing Market Contruction (sf) Area (sf) Area (sf) Area (sf) (%) Rent ($psf) ($psf) ($psf) Completions (sf) (sf) (sf) GTA Central 257,683,036 4,074,102 526,503 4,600,605 1.8% $10.27 $3.70 $230 1,171,596 1,463,768 5,241,293 GTA East 52,037,831 907,700 0 907,700 1.7% $7.66 $3.21 $139 107,419 1,402,381 6,577,603 GTA North 188,073,865 2,743,078 326,057 3,069,135 1.6% $11.76 $3.74 $254 693,189 1,773,811 10,981,928 GTA West 392,865,841 6,415,886 1,487,186 7,903,072 2.0% $9.78 $3.83 $327 1,223,068 8,828,831 23,821,689 Greater Toronto 890,660,573 14,140,766 2,339,746 16,480,512 1.9% $9.79 $3.66 $266 3,195,272 13,468,791 46,622,513 © 2020 Avison Young Commercial Real Estate (Ontario) Inc., Brokerage. All rights reserved. E&OE: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young. Greater Toronto Area Industrial Market Report / Third Quarter 2020 Q3 2020 QoQ GTA Central Market Monitor Two buildings were completed Available space in the Central in the Central market during the 258 msf market decreased 10 bps quarter quarter, adding nearly 1.2 msf to Inventory over-quarter to 1.8% – up 60 bps the inventory, including Amazon’s from one year earlier. The average 1 msf fulfillment centre at 6351 asking net rental rate closed the Steeles Ave. E. Six buildings totaling 4.6 msf third quarter at $10.27 psf – up 1.5 msf were under construction Available Area almost 4% quarter-over-quarter – including grocery chain Metro’s and 11% year-over year – with East two new buildings: a complete $10.27 psf York commanding the highest rents redevelopment of its existing Average Asking Net Rental Rate at $11.50 psf. Availability improved Etobicoke distribution centre at 17 most notably in Etobicoke and Vickers Rd. (540,000 sf ) and new Scarborough, shifting down 40 bps in construction of a temperature- 1.5 msf / 6 buildings both to 1.8% and 1.5%, respectively. controlled facility at 170 The Under Construction West Mall (209,500 sf ). Currently The most notable third-quarter there are 35 buildings in the Availability Trends lease transaction in the Central preleasing pipeline totaling 5.2 msf market was a 295,000-sf logistics 6 5% – a mixture of speculative projects deal at Pure Industrial Real Estate and those awaiting a tenant. 5 4% Trust (PIRET)’s 75 Venture Dr. in 4 Availability Rate 3% Scarborough – the building had 3 been completed in the fourth 2% 2 quarter of 2019. On the sales front, 1% Total Available Area (msf) 1 Compass Data Centres purchased 0 0% 77 Fima Cres. in Etobicoke Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 (215,000 sf on 7.8 acres) for $30 Direct Available Area (sf) Sublet Available Area (sf) Availability Rate (%) million, while a private investor acquired 4800-4810 Sheppard Occupancy Cost Trends Ave.