FourthSecond QuarterQuarter 2020 2018 / Industrial / Industrial Market MarketReport Report Greater Toronto Area Quick Stats The COVID-19 lockdown paused the Greater a 550,000-sf Vaughan facility set to open in Toronto Area (GTA) economy for most of 2024. 1.9% the second quarter. Stalled construction Many projects slated for second-quarter resumed late in the quarter, and delivery have shifted into the latter half of Availability rate in the transactional decision-making slowly began Greater Toronto Area the year due to construction stoppages. to resume. The full impact will be revealed in Nevertheless, 12 buildings totaling more the coming quarters, but pent-up demand than 2 million square feet (msf) were $9.73 psf is expected to sustain positive momentum completed during the second quarter for the industrial market. The GTA-wide (80% preleased), for a first-half total of Average asking net rental rate in availability rate rose 20 basis points (bps) 23 completions tallying 3.6 msf – almost the Greater Toronto Area during the quarter – and 40 bps year-over- double the 1.9 msf recorded in first-half year. Much of the increase was focused in 2019. Meanwhile, almost 15 msf remained spaces 50,000 square feet (sf) and smaller. under construction GTA-wide, with 11 msf 12 Some sectors, such as food and beverage targeting 2020 delivery, pushing the full-year Properties in the Greater Toronto and paper products, are shifting from “just- total to a decade-high. Area with more than 250,000 sf in-time” to “just-in-case” manufacturing to available – same as one year ago ease supply-chain issues, stocking more Average asking net rental rates, despite inventory – which requires more warehouse economic conditions, reached a record-high space. Demand for quality space is expected $9.73 per square foot (psf) – up 2% quarter- to increase in the coming year. over-quarter, 16% year-over-year, 52% from 14.6 msf three years ago, and 64% in the past five GTA-wide industrial space Despite the slow first half of the year, several years. Despite the recent rise in availability, under construction – up from significant deals were inked, mostly by a shortage of premium mid- to large-bay 14.2 msf one year ago e-commerce and food companies. Amazon space persists. Some landlords may offer bolstered its presence in the Central market flexibility to retain and attract tenants, while – signing a deal for 635,000 sf – and leased keeping face rates intact. It is still too early 16% 453,000 sf in GTA West. Goodfood Market, to predict whether rates will continue to Year-over-year growth in an online grocer, inked a 200,000-sf deal in rise despite the pandemic, but stakeholders asking net rental rates in the south Mississauga, while Walmart furthered will be keeping a close watch in the coming Greater Toronto Area the trend with a $3.5-billion infusion into its quarters. Canadian supply-chain network, including Partnership. Performance. avisonyoung.ca Greater Toronto Area Second Quarter 2020 / Industrial Market Report GTA Market Monitor Q2 2020 QoQ The overall industrial availability rate The average asking net rental rate in the 887 msf across the GTA increased by 20 bps to GTA continued its upward trajectory in Inventory 1.9% during the second quarter – 40 the second quarter, but accelerated at bps higher than one year ago. Despite a slower pace, rising $0.22 during the 17.2 msf construction completions of 2.1 msf, quarter to reach a new high of $9.73 Available Area there was little effect upon overall psf. Overall, rates rose by 2% quarter- availability as most of the new space over-quarter and 16% year-over-year. $9.73 psf had been preleased (80%). Quarter-over- GTA North continued to lead the charge, Average Asking Net Rental Rate quarter, availability in both the GTA West commanding an average of $10.36 psf and Central markets climbed 30 bps to – led by Richmond Hill and Vaughan at 14.6 msf / 63 buildings 2.3%, while the North market reported $11.05 and $11.37 psf, respectively. By Under Construction a marginal increase in availability of 20 comparison, the GTA East market is a bps. Availability in GTA East declined bargain with average rents at $7.67 psf, marginally, falling 10 bps. remaining the only GTA market with a Availability Trends sub-$8 overall average asking rent. 20 5% Deal velocity, albeit slower than normal, 4% was still respectable. Several large new Second-quarter completions totaled Availability Rate Availability 3% deals were inked during the first half 2.1 msf across 12 buildings, with 10 of 2020 despite the adverse economic GTA West contributing the largest 2% conditions. Companies also renewed proportion (924,000 sf). A further 63 1% Total Available Area (msf) Area Available Total existing space or extended current buildings (totaling 14.6 msf) were 0 0% Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 leases for the short term, to allow them under construction, mostly in GTA Direct Available Area (sf) Sublet Available Area (sf) Availability Rate (%) flexibility as the economy improves. West. In addition, 141 buildings were in Significant leases in the second preleasing mode, with the potential to Occupancy Cost Trends quarter included Amazon signing a add more than 45 msf across the GTA if $16 deal for 635,000 sf at 400 Nugget Ave. built. This is an increase of more than 3 $14 in Scarborough as well as the former msf compared with year-end 2019, when $12 Bombay Company buildings at 3389 & 115 buildings totaling 42 msf were in the $10 $8 3495 Steeles Ave. E. in Brampton that preleasing pipeline. $6 total 453,000 sf. Goodfood Market signed $4 a deal for 200,000 sf at 759 Winston $2 $0 Churchill Blvd. in Mississauga – the new Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Avg. Net Asking Rate ($psf) Avg. Additional Rent ($psf) 745,000-sf facility is currently under construction with delivery expected in early 2021. Number of buildings with 250,000+ sf 12 available Inventory Direct Avail. Sublet Avail. Total Avail. Avail. Rate Avg. Net Asking Avg. Addt'l Rent Avg. Sale Price Current Under Contruction Preleasing Market (sf) Area (sf) Area (sf) Area (sf) (%) Rent ($psf) ($psf) ($psf) Completions (sf) (sf) (sf) GTA Central 256,354,389 4,296,287 505,355 4,801,642 1.9% $9.91 $3.73 $207 159,438 2,635,364 6,360,293 GTA East 51,919,023 850,378 5,074 855,452 1.6% $7.67 $3.32 $308 535,000 1,509,800 5,046,200 GTA North 187,228,689 2,236,880 459,548 2,696,428 1.4% $10.97 $3.95 $241 524,392 1,917,000 10,981,928 GTA West 391,608,052 7,141,511 1,690,105 8,831,616 2.3% $9.74 $3.67 $222 924,637 8,513,455 22,915,743 Greater Toronto 887,110,153 14,525,056 2,660,082 17,185,138 1.9% $9.73 $3.68 $229 2,143,467 14,575,619 45,304,164 Partnership. Performance. avisonyoung.ca Greater Toronto Area Second Quarter 2020 / Industrial Market Report GTA Central Market Monitor Q2 2020 QoQ Available space in the Central totaling 12.6 msf were under 256 msf market rose 30 bps quarter-over- construction – including Amazon’s Inventory quarter to 1.9% – up 40 bps from fulfilment centre at 6351 Steeles one year earlier. The average asking Ave. E. (1,023,000 sf) and grocery 4.8 msf net rental rate closed the second chain Metro’s two new buildings: Available Area quarter at $9.91 psf – a rise of $0.60 a complete redevelopment of its (6%) quarter-over-quarter and existing Etobicoke distribution centre $9.91 psf 24% year-over year – with Toronto at 17 Vickers Rd. (540,000 sf) and Average Asking Net Rental Rate commanding the highest rents at new construction of a temperature- $11.17 psf. Availability shifted most controlled facility at 170 The West 2.6 msf / 8 buildings notably in Etobicoke (up 50 bps to Mall (209,500 sf). Additionally, Under Construction 2.2%), while Scarborough posted pharmaceutical company Sanofi a 10-bps decrease to 1.9% and Pasteur is constructing a 168,000-sf continues to be popular with tenants design-build expansion at its existing Availability Trends and investors, thanks to its strong facility located at 1755 Steeles Ave. W. 6 5% transit infrastructure and diverse and in North York. The preleasing pipeline 5 4% dense labour pools. increased to 6.3 msf (38 buildings) – a 4 Rate Availability 3% mixture of speculative projects and 3 The most notable second-quarter those awaiting a tenant. 2% 2 lease transaction in the Central 1% Total Available Area (msf) Area Available Total 1 market was Amazon’s lease for 0 0% 635,000 sf at 400 Nugget Ave. in Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Scarborough – currently tenanted Direct Available Area (sf) Sublet Available Area (sf) Availability Rate (%) by Technicolor, which will vacate Occupancy Cost Trends the building in early 2021. On the sales front, Adelaide Development $16 $14 Corp. purchased 37 Bethridge Rd. in $12 Etobicoke (128,300 sf on 4.9 acres) for $10 $19.1 million, while a private investor $8 (172 Belfield Ontario Inc.) acquired $6 Avg. Gross Rent ($psf) Rent Gross Avg. $4 172 Belfield Rd. (a single-tenant, $2 26,300-sf facility on 4 acres) from $0 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Sherwin-Williams Canada Inc.