- What Avison Young reported a rise in GTA industrial space availability and a decrease in asking rents for Q3
- Why Demand for industrial space continues to slow and there are more options for tenants
- What next Sublease space has tripled since 2023 and now comprises 16% of overall industrial space in the GTA
The amount of available industrial space continued to trend upward in the GTA while average asking rents slipped for a fourth consecutive quarter, Avison Young said in a new market report.
The brokerage found that the availability rate ticked up 50 basis points in Q3 to 4.5% as 42m sq ft of new space was added to the country’s largest property market. That’s the highest availability has been since early 2015.
In turn, average asking industrial rents fell 1.5% regionwide during the period to $17.86/sq ft. That’s the fourth consecutive quarter that asking rents have declined, resulting in a year-over-year drop of nearly 3%. The decrease is fueled by slowing demand and more options for industrial space in the market, Avison Young said.
“Rental rates are expected to hover around current levels as the explosive rental growth experienced in the past three years is not sustainable given the current rising availability rates,” the brokerage said. “More listings are coming to market with posted rents to entice interest as competition builds.”
Sublease space also continued to grow in Q3, rising to 16% of overall space in the GTA by the end of the quarter. In the last year, the amount of available sublease space throughout the region has tripled to 6.7m sq ft.
Along with that rise comes a quadrupling of sublease vacancies within the region over the last year.
Industrial property transactions in the GTA also fell sharply, with Q3 sales volume totaling roughly $1.2bn, down 38% quarter over quarter. The number of transactions also fell, with 126 total sales reported in the GTA compared with 237 in the previous quarter.
The average capitalization rate was 5.5%, steady with the previous two quarters, as the average price rose ever so slightly to $309/sq ft.
The largest industrial property sale tracked by Avison Young during the quarter was Prologis’ acquisition of a warehouse and distribution centre at 8450 Boston Church Road in Milton from Sycamore Partners for $361m, or $270/sq ft – the largest deal for a distribution centre in Ontario so far this year.
In other notable deals, DH Management picked up another Caledon property, at 261 Abbotside Way, for $48.6m, or $329/sq ft, and LaFarge Canada paid Ncap Nicola (Wicksteed) $43.5m, or $512/sq ft, in August for 235 Wicksteed Avenue in Toronto’s East York neighbourhood.
In the largest land transaction of the year, Tribal Partners purchased 5122 First Line in Milton from a numbered Ontario company for $55.6m, $1.1m/acre, in May.
Article amended at 11:54 a.m. ET on Oct. 30, 2024, to remove a transaction.