- What GTA small bay industrial properties are seeing prices rise north of $500/sq ft
- Why Industrial user tenants are opting for small-building acquisitions over renewing leases at higher rates
- What next The trend is being seen in other major Canadian markets
After years of growth, the Greater Toronto Area’s industrial market is experiencing a comedown. Industrial sales volumes over $1m plummeted nearly 50% in 2024 compared with those of the previous year, Avison Young said in a recent report – a result of slowing demand and creeping oversupply.
But as newly built and gleaming mega-facilities are coming online across the region and struggling to find occupants – 2m sq ft of new industrial space was negatively absorbed in the GTA in 2024 – small industrial properties, in many cases several decades old, are seeing unprecedented demand.
These types of buildings, found in core GTA markets such as Mississauga and Brampton, are prized despite having none of the modern design features of new industrial assets and often requiring major renovations.
Sales of small bay industrial properties in the GTA in the past five months have seen some eyebrow-raising valuations. According to recent industrial property sales data collected by Altus Group, a 15,000 sq ft building in Scarborough at 107 Shorting Road sold last October for nearly $8.8m, achieving a valuation of $577/sq ft.
In February, GTA steel bar distribution company Scan Tube Steel Services offloaded a 17,000 sq ft freestanding industrial property at 7205 Edwards Boulevard in Mississauga for $541/sq ft. That same month, a private buyer picked up a 19,000 sq ft multi-tenanted East York property dating to 1950 for $10m, or $533/sq ft.
“There’s a huge pool of operating businesses that need that sweet spot of 20,000 to 60,000 sq ft. There’s a lot of interest because there’s just so many different types of operations that can operate within that size range,” Joe Rosati, a vice president for Lennard Commercial Realty told Green Street News.
“An owner-occupier doesn’t really care so much about return on investment. They’re using it for their operating business and, for them, an acquisition makes sense.”
Users will typically accept a higher valuation to purchase a smaller property, but the average pricing of $500/sq ft for small bay properties now seen throughout the GTA is still noteworthy, JLL national industrial research manager Chad Piche said.
A primary reason for the increased demand, he said, is that industrial users make up some 18% of property buyers nationally. Just a few years ago, less than 10% of industrial property acquisitions were made by users.
And with rental rates in the GTA at nearly $20/sq ft, property ownership is looking like a much more attractive prospect.
“That could certainly be part of the demand, even if pricing is up,” Piche told Green Street News. “A lot of smaller users who maybe have 5,000 to 10,000 sq ft of space are looking at that lease renewal doubling and are considering the prospects of purchasing a lot more than they might have five or 10 years ago.”
Although concentrated in the GTA, the phenomenon of higher small bay pricing can be seen in other markets across the country where rents have increased considerably in the last five years, Piche said.
“I was on a call recently and brokers out in Calgary were saying they’re seeing record pricing for industrial sales below 20,000 sq ft,” he said.
“I would say it’s the same across the board, in Alberta, Vancouver, Montréal, anywhere rents have gone way up.”
Investors are not fully out of the picture either, say market watchers. Once acquired, an old building can be converted into individual industrial condos with modern design features and better clearance heights that could then be sold or leased by the unit at an attractive valuation.
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