- What Demand remains high for industrial assets, particularly in key markets
- Why New space coming online is leading to higher availability rates
- What next Rent growth is moderating as sublet space remains high
Investor confidence remains high for Canadian industrial properties even as the amount of available space continues to rise, Altus Group said in a second-quarter update.
By volume, industrial remained the top-performing asset class, with $5.9bn of deals in the first of half of 2024. The multifamily sector followed with $4.4bn of trades, while industrial, commercial and investment (ICI) land deals came in at $3.6bn.
While the figures don’t capture all deal activity this year, they provide a “snapshot of activity” that demonstrates the appeal of Canadian industrial properties for investors, Altus said.
“The fundamentals are still there, and rental rates are slightly pushing up. The overall demand for [industrial assets] remains strong from a capital market standpoint,” Ray Wong, Altus Group’s vice president for data solutions client delivery, told Green Street News.
Among the notable second-quarter deals tracked by Altus in the industrial space: a 331,000 sq ft Brampton, Ont., property at 2600 North Park Drive sold for $110m ($332/sq ft) in May.
Also in the quarter, a 281,000 sq ft warehouse at 1000 Paul-Kane Place in Laval, Que., traded for $67.5m ($240/sq ft). Another Quebec property, a 314,000 sq ft building at 1050 Beaulac Street in St-Laurent within the Island of Montréal, was purchased for $66.5m ($212/sq ft).
And in June, 445 Milner Avenue in Scarborough and some adjacent properties totalling 187,000 sq ft were sold for $60.1m ($322/sq ft).
The national availability rate rose 70 basis points during Q2 to an eight-year high of 5.8%. Some 4.4m sq ft of new space across 27 completed projects was added in the period, with the majority coming online in southwestern Ontario (1.4m sq ft) and Calgary (904,000 sq ft). About 43% of the space was preleased.
Nationwide, there were 141 projects totalling 27.7 million sq ft under construction at quarter-end. On average, that space is 30% preleased, according to the Altus update. Vancouver had the highest preleasing activity at over 50%, followed by Calgary, at more than 40%. Less than 30% of space under construction in Toronto and southwestern Ontario is preleased.
Rental rates are up only 3% to 7% across the country, compared with the double-digit percentage increases seen in previous years, the firm said, as sublet space continues to weigh on the market.
Nonetheless, Wong said investors continue to see industrial real estate as a reliable investment.
“They’re strong assets to have over the medium and long term because of the stable returns,” he said.
