- What The market saw just 1.7m sq ft of major sales in Q1
- Why Increased competition from markets outside the GTA weighed on sales
- What next The outlook remains murky for the rest of the year
Demand for industrial properties remains sluggish in the Greater Toronto Area, as investors continue to hold out hope for a rate cut, JLL said in a new report.
In its sector outlook for the country’s largest market, the brokerage said that just 1.7m sq ft of “major sales activity” occurred in Q1, while the average asking sale price also continued to drop. JLL doesn’t expect activity to rebound until interest rates are cut and confidence is renewed in the market.
“Until such rate changes occur, economic pressures are expected to temper leasing and investment activities compared to previous years,” JLL said. “Vacancy and availability are anticipated to continue increasing, paired with downward pricing adjustments from both landlords and sellers alike.”
JLL vice president Jonathan Peretz said that while interest rates have had a material effect on industrial investment in the GTA, he doesn’t think a rate cut would immediately spur a flood of sales activity.
“In terms of that big inflow of capital going into industrial, a lot of trades, I think it’s going to take a little bit of time,” he said.
Notable Q1 transactions in the GTA include Dream’s purchase of a portfolio from Fiera Real Estate for $71.8m, or $229/sq ft. The properties, comprising 314,000 sq ft, are in the eastern submarkets of Pickering and Ajax.
In Mississauga, Panattoni sold two properties during the quarter. ITD Industries bought the 172,000 sq ft facility at 910 Mid-Way Boulevard for $42m, or $244/sq ft, and Brookfield purchased the 130,000 sq ft property at 2385 Meadowpine Boulevard for $44.6 m, or $342/sq ft.
In Brampton, Atlantic Packaging Products purchased a 122,000 sq ft facility at 1615 Clark Boulevard from developer Triovest for $39m, or $320/sq ft.
Also weighing on the market is increased competition from outside of the region. Investors increasingly are looking for opportunities south of the GTA in Hamilton and to the southwest from growing municipalities like Kitchener, Cambridge and Guelph.
Those midsize markets have strong workforces and are eager to absorb GTA companies looking to migrate.
“There has been a push to grow,” one broker with knowledge of markets outside the GTA said. “You’re seeing organic growth, but also new groups coming into the market.”
