- What Warehouse sales were up 82% quarter over quarter
- Why Large portfolio sales helped drive the activity
- What next Rents could come under pressure as new supply comes online.
Industrial-property sales activity in the Greater Toronto Area picked up significantly in the first quarter as investor interest in the sector remained strong, Colliers said in a recent market report.
Sales volume totaled $1.8bn in the first three months, up 82% over the previous quarter. In its latest Toronto Industrial Market Report, the brokerage noted that average deal prices dropped to $302/sq ft from $344/sq ft in the fourth quarter. That said, the number of deals and the total square footage traded rose.
“This positive momentum can, in part, be attributed to large portfolio sales from institutional sellers and REITs, as well as interest from foreign buyers, who consider GTA industrial real estate to be exceedingly well-priced in a global context,” the firm said in the report.
Among the notable deals Colliers highlighted was a $77.9m purchase by Corporation of the City of Brampton of Alectra Utilities’ former operations centre at 175 Sandalwood Parkway West. The sale price for the 150,000 sq ft facility worked out to $521/sq ft.
Vancouver-based Concert Properties was also active, scooping up a fully leased Class-A industrial property in Oakville for $67.1m, or $332/sq ft. RBC Capital Markets brokered the deal. Rainbow Capital Investments paid $67m, or $225/sq ft, for a 291,000 sq ft warehouse in Whitby. Tenants include a trampoline park and an Amazon liquidation facility.
In Mississauga, commercial-trailer manufacturer ITD Industries bought a 172,000 sq ft facility at 910 Mid-Way Boulevard for $42m, or $243/sq ft, and KingSett Capital paid $30m, or $211/sq ft, for a 142,000 sq ft food-processing plant at 7550 Torbram Road.
Industrial rents are holding firm in the GTA, but as the supply crunch caused by the pandemic continues to ease and record amounts of new space hit the market, owners may wield less pricing power. Asking rents dipped slightly during the first three months of the year, but remained robust at $18.43/sq ft.
“Rents are a little bit stagnant right now, but that’s an indication that we’re in a healthy spot,” said Russell Wills, Colliers’ national industrial lead and co-author of the report. “We’ve had a lot of growth for what’s been an undersupplied market for years, and we’re starting to catch up now.”
With much more industrial space available and more projected to come online, owners, who during the pandemic enjoyed a tight market, now are needing to provide sweeteners like free rent to convince tenants to sign up at current market rates.
“Where I think that it would have been a little bit more one-sided in the past, I think landlords are more willing to look at various things to make the transaction process easier these days,” Wills said.
Even as available space rose 3.1% in the first quarter, Wills is bullish on the long-term attractiveness of the GTA industrial market, particularly to foreign and private investors who see plenty of value still to be had.
“If you look across major markets, for instance Los Angeles or New York, their availability is all higher than us, so [investors] see that there’s still opportunity to grow here,” Willis said.
