- What Industrial landlords are seeing higher demand
- Why Canada is set to increase military spending, particularly in Halifax
- What next A French aerospace and defense company signed a 15-year lease
Some industrial landlords are seeing benefits from increased military spending in Canada, particularly assets along the Trans-Canada Highway and near shipbuilding infrastructure in Nova Scotia.
Earlier this month, the Canadian government awarded an $8bn contract to Irving Shipbuilding in Halifax to build three destroyers. It’s thought to be just the beginning as Canada looks to retool and replace outdated military equipment.
PRO Real Estate Investment Trust, a large industrial landlord in the region, sees the project creating over 5,000 jobs, with half in Halifax, and increasing demand for industrial space. Proreit is the largest property co-owner in the sprawling Burnside Industrial Park, which is about 5 km from Irving Shipbuilding, where the destroyers are being built.
“It’s nothing but positives for us as an industrial player in the Burnside Industrial Park, which is the largest industrial park east of Montréal and north of Boston,” Gord Lawlor, chief executive of Proreit, told Green Street News.
Anywhere along the Trans-Canada Highway between central and Atlantic Canada could see increased demand for industrial space, he said. Proreit’s property in Kanata, Ont., beside Ottawa, already has benefited. Thales, a French multinational aerospace and defense company, recently inked a 15-year lease for 128,000 sq ft of space.
“That tenant is tied to the Halifax contract in some respect, so besides the assets we own in Halifax, it could be beneficial to our other properties or other industrial real estate across Canada,” Lawlor said.
The trade war with the U.S. won’t necessarily have only negative effects, he added.
“Everybody’s talking about the negatives for industrial associated with tariffs, but the other side of that coin is industrial real estate is still undersupplied in Canada and may become more expensive to build based on this recent U.S. foreign-policy change,” he said.
“If we end up with increased defence spending, increased Canadian manufacturing for our own account and industrial real estate undersupplied — I like having industrial real estate exposure and ownership where the assets are significantly below replacement cost.”
Zach Aaron, vice president of investments and asset management at PROREIT, said the firm, together with its partner Crestpoint Real Estate Investments, owns approximately 3m sq ft of industrial space in Burnside Industrial Park. Halifax’s total industrial supply, including both owner-occupied and for-rent space, is upward of 15m sq ft; Burnside is approximately 8m to 9m sq ft, excluding owner-occupied supply.
“We’re seeing a direct impact from the shipbuilding contract,” Aaron told Green Street News. “We had a building [in Burnside], a 60,000 sq ft single-tenant asset, that had gone vacant. We had been marketing it to a new tenant, and we ended up selling it. The group that ended up buying the building — we later found out, they wanted to be in the park because they were going to be a supplier to the shipbuilding contract.”
He said Proreit had bought the asset for around $90/sq ft and sold it for $175/sq ft.
“It speaks to the strength of being in Burnside,” he added.
Steve Foot, managing partner at iQ Commercial in Halifax, said large shipbuilding projects such as this provide confidence to the market and a backstop for investors. Retail and purpose-built rental assets could benefit to a lesser degree.
Earlier this week Green Street News revealed that Manga Hotel Group notched a $130m loan for the first phase of construction of its purpose-built rental project in Dartmouth. The entirety of the project will comprise over 1,100 units once complete. All three towers will overlook Halifax Harbour.
“For a superproject like this, although there is some infrastructure in place to do it, there’s no doubt a need to bring more people to the area. So, for sure, retail and purpose-built rental would be impacted positively,” Foot told Green Street News.
