Greater Toronto Area Industrial Market Report

Transcription

1 ND QUARTER 15 Greater Toronto Area Industrial Report Partnership. Performance. Overview Moving into the latter half of the year, the Greater Toronto Area (GTA) has extended its stay in the low vacancy environment, signalling sustained positive activity in both the leasing and sale markets. The industrial market has experienced significant positive net absorption, prompted by a continuation of large-block transactions and a lack of available industrial supply, both for lease and sale. To that effect, each region across the GTA witnessed a quarter-over-quarter drop in its availability rate, with the overall rate dipping by basis points to.%. The rate drop resulted from a net absorption of 5.1 million square feet (msf) within an msf market, even as the GTA s industrial inventory grew by 1. msf in the second quarter. Noteworthy lease transactions were led by both the retailing and transportation & logistics industries. Retailers IKEA and Wolverine Worldwide imprinted their mark on the industrial landscape, as IKEA took 75% of Prologis existing 531,-square-foot (sf) distribution facility at 375 Argentia Road and Wolverine leased all of Orlando Corporation s 33,9-sf speculative facility, currently under construction, at 5 Millcreek Drive. Sherway Logistics and APPS Transport concluded the quarter s top four lease transactions, absorbing Orlando Corporation s 39,9-sf speculative under-construction facility at 55 Northwest Drive and its existing 7,1-sf facility at 95 Tomken Road, respectively. In the first half of the year alone, the number of new large-block (more than 3, sf) lease transactions completed has skyrocketed past the total achieved in 1. This year s seven new large-block lease deals, and another expected to firm up in the coming months, illustrate the dominant presence of the retailing and transportation & logistics industries within the GTA s industrial landscape. Highlights Retail s effect on the industrial landscape Target Canada s misfortunes have provided its big-box competitors with expansion opportunities across the country. In June, Lowe s Canada acquired Target s 1.3-msf logistics and distribution facility at 5 Boston Church Road in Milton, which had faced potential selling difficulties due to its specialized nature. The distressed location sold for $1 million, or approximately $ per square foot (psf). Lowe s has, in turn, brought its 35,-sf distribution centre at 3333 James Snow Parkway in Milton to the sublease market, listed for $.5 psf net. With a distance of only two kilometres between the two properties, the move by Lowe s was driven predominantly by its desire for a number of Target s retail locations, packaging the Boston Church warehouse as part of the acquisition deal. Further impacting the industrial landscape, Sobeys announcement that it plans to streamline its operations in Vaughan has prompted the imminent closure of its current distribution facility at 71 High Point Drive in Milton. At the time of writing, Sobeys has not marketed its Milton facility for sublease. Its Vaughan Retail Support Centre, a fully automated distribution centre looming at 5 feet clear, will absorb the distribution activity once its 3,-sf expansion is complete. The estimated $9 million construction is expected to be completed in the fall of 1. What is Happening? Milton, the new hub of industrial development MARKET FACTS A battle is brewing in Milton. There is 3.7 msf of available industrial space that is either in shell condition, under construction, or firmly proposed within a.5 kilometre radius of each other. Milton holds 3% of the overall available speculative product currently under construction in the GTA, with HOOPP s Escarpment Way, Building E, and Emery Investments 5 Mount Pleasant Way set for completion at the end of 15 and start of 1, respectively. Similar to Triovest s,-sf shell facility, they are built on spec and remain untenanted. The 19-msf market s availability rate, which has held steady at 5% in the past year, is forecasted to spike as further construction commencements are expected in the near future. Prologis three buildings at 3 (7% preleased), 399, and 9 Lawson Road, an aggregate of 5,9 sf, will each break ground in late July. Moving further into the later months of 15, Kylin Developments 99 Peddie Road and Sun Life s two facilities at 7 and 9 Wedge Way are anticipated to begin construction..5 Million square feet of total area of industrial speculative and designbuilds under construction in GTA 1. Million square feet of industrial new supply in Q Number of speculative developments currently under construction 59% Rate of preleased space for industrial speculative product

2 Greater Toronto Area - Overview A renewed interest in Vaughan Milton is not the only market drawing developer attention. Vaughan s construction activity has spiked within the past year. As the secondlargest industrial market in the GTA home to 15 msf in inventory it has branded itself as a strong player for land sales and design-builds. Corporations such as FedEx Ground, Athena Automation, and Northern Transformer, are each completing their design-builds, with Costco s plans scheduled for public hearing in September. In terms of speculative development, Vaughan had not seen any new activity since ZZEN Group s building extension at Zenway Boulevard was completed in the fourth quarter of 13. The market now has three projects underway, of which two are fully, and the third is %, preleased. Metrus is also anticipated to break ground on its 99 Locke Street (fully preleased) and 1 Creditstone Road facilities in time for a spring 1 availability. Forecast As mentioned above, Milton has seen increased interest from developers. The market benefits from large blocks of available and affordable land. Nevertheless, the question remains as to whether users will want to locate there. If the past is any indication, most of the product will linger in shell condition for several quarters and construction dates will be postponed. Milton s new supply has previously been hindered by slow absorption, with notable examples including Triovest s vacant LEED-certified 95 Drive, built in the fourth quarter of 1, and Prologis 995 Peddie Road, which was absorbed a year after its completion date. In addition, neither project currently under construction is preleased. Across the GTA, demand for large-block space will decelerate as the list of active tenants on the market contracts. A large portion of expected leasing activity has already taken place, through the absorption of recently completed developments and preleased projects. Developers willing to demise space to accommodate smaller-block tenants, such as Prologis, will have a higher leasing success rate. 1.% GTA Investment Capitalization Rates Average Cap Rate 9.%.% 7.%.% Average Capitalization Rates Product Type Q1-15 Q-15 Industrial 5.7 % 5. % Multi-Tenant Industrial 5. % 5. % 5.% ' '1 ' '3 ' '5 ' '7 ' '9 '1 '11 Q1 Q '1 '13 '1 '15 Industrial Multi Tenant Industrial Investment Volume - Transactions Over $3 M Average Sales Price per Square Foot - Transactions Over $3 M $9 $11 $ Investment Volume ($ Millions) $7 $ $5 $ $3 Average Price ($ psf) $1 $9 $ $ $7 $1 $ Q1 ' '9 '1 '11 '1 '13 '1 Q '15 $ Q1 ' '9 '1 '11 '1 '13 '1 Q '15

3 Greater Toronto Area - Overall Total Area (, sf) GTA - Industrial Trends GTA - Industrial Trends % 5% % 3% % 1% Total Rate Average Price ($psf) $1. $. $. $. $. GTA - Occupancy Cost Trends GTA Central - Occupancy Cost Trends % $. Direct Space Sublet Space Availability Rate Asking Net Rent Additional Costs GTA - Space by Clear Height GTA Central - Space by Clear Height GTA - Large Block Availability > 3 ft -3 ft -7 ft 1-3 ft < 1 ft > 5, sf 1, - 9,999 sf 5, - 99,999 sf GTA MARKET SUMMARY Inventory (msf) Availability Rate (%) Asking Net Rent ($psf) GTA West 371. % $.1 GTA Central 3. % $ 5.51 GTA East 3.3 % $ 5.7 GTA North % $. GTA Total. % $ 5.95

4 Greater Toronto Area - West 5 GTA West - Industrial Trends GTA West - Industrial Trends 7% $1. GTA West - Occupancy Cost Trends GTA West - Occupancy Cost Trends Total Area (, sf) % 5% % 3% % 1% Total Rate Average Price ($psf) $. $. $. $. % $. Direct Space Sublet Space Availability Rate Asking Net Rent Additional Costs GTA West - Space by Clear Height GTA West - Space by Clear Height GTA West - Large Block Availability GTA West - Large Block Availability > 3 ft -3 ft -7 ft 1-3 ft < 1 ft > 5, sf 1, - 9,999 sf 5, - 99,999 sf GTA WEST - SUBMARKET SUMMARY Inventory (msf) Availability Rate (%) Asking Net Rent ($psf) Brampton 9 5. % $ 5.51 Burlington 7.1 % $.3 Caledon 1 1. % $ 5.7 Halton Hills 1.3 % $ 5.95 Milton % $.33 Mississauga % $. Oakville 9. % $. GTA West 371. % $.1

5 Greater Toronto Area - Central GTA Central - Industrial Trends GTA Central - Occupancy Cost Trends 1 5% $1. Total Area (, sf) % 3% % 1% Total Rate Average Price ($psf) $. $. $. $. % $. Direct Area Sublet Area Total Rate Asking Net Rent Additional Costs GTA Central - Space by Clear Height 1 GTA Central - Space by Clear Height 1 GTA Central - Large Block Availability GTA Central - Large Block Availability > 3 ft -3 ft -7 ft 1-3 ft < 1 ft > 5, sf 1, - 9,999 sf 5, - 99,999 sf GTA CENTRAL - SUBMARKET SUMMARY Inventory (msf) Availability Rate (%) Asking Net Rent ($psf) East York 1 1. % $ 5. Etobicoke 7. % $.9 North York 7. % $ 5.53 Scarborough 5. % $.9 Toronto 3 1. % $ 7.31 GTA Central* 3. % $ 5.51 * Total figures for the GTA Central include additional submarkets not listed above (i.e. York).

6 Greater Toronto Area - East GTA East - Industrial Trends GTA East - Occupancy Cost Trends % $1. GTA East - Occupancy Cost Trends Total Area (, sf) 1 5% % 3% % 1% Total Rate Average Price ($psf) $. $. $. $. % $. Direct Space Sublet Space Availability Rate Asking Net Rent Additional Costs GTA East - Space by Clear Height GTA East - Large Block Availability > 3 ft -3 ft -7 ft 1-3 ft < 1 ft > 5, sf 1, - 9,999 sf 5, - 99,999 sf GTA EAST - SUBMARKET SUMMARY Inventory (msf) Availability Rate (%) Asking Net Rent ($psf) Ajax 7.7 % $ 5.33 Oshawa 1 1. % $ 5.5 Pickering % $ 5. Whitby 1 5. % $ 5. GTA East* 3.3 % $ 5.7 * Total figures for the GTA East include additional submarkets not listed above (i.e. Brock, Clarington, Scugog and Uxbridge).

7 Greater Toronto Area - North GTA North - Industrial Trends GTA North - Industrial Trends 5% $1. GTA North - Occupancy Cost Trends GTA North - Occupancy Cost Trends Total Area (, sf) % 3% % 1% Total Rate Average Price ($psf) $1. $. $. $. $. % $. Direct Space Sublet Space Availability Rate Asking Net Rent Additional Costs GTA North - Space by Clear Height 1 GTA North - Large Block Availability GTA North - Large Block Availability > 3 ft -3 ft -7 ft 1-3 ft < 1 ft > 5, sf 1, - 9,999 sf 5, - 99,999 sf GTA NORTH - SUBMARKET SUMMARY Inventory (msf) Availability Rate (%) Asking Net Rent ($psf) Aurora.7 % $.95 Markham 3. % $.7 Newmarket % $.13 Richmond Hill 1. % $.57 Vaughan % $ 5.95 GTA North* % $. * Total figures for the GTA North include additional submarkets not listed above (i.e. East Gwillimbury, Georgina, King and Whitchurch-Stouffville).

8 Greater Toronto Area - Overall SUMMARY OF TENANT OPTIONS Number of Buildings with Space Properties with More Than 5, sf Properties with 1, to 9,999 sf Properties with 5, to 1, sf Properties with, to 5, sf Properties with Less Than, sf East York Etobicoke North York 17-1 Scarborough Toronto GTA Central Ajax Oshawa Pickering Whitby GTA East Aurora Markham Newmarket Richmond Hill Vaughan GTA North Brampton Burlington Caledon Halton Hills Milton Mississauga Oakville GTA West

9 Greater Toronto Area SIGNIFICANT INDUSTRIAL LEASE TRANSACTIONS Address Tenant Size Lease Type 375 Argentia Road, Mississauga IKEA 1, New 55 Northwest Drive, Mississauga Sherway Logistics 33, New 5 Millcreek Drive, Mississauga Wolverine Worldwide 3, New 95 Tomken Road, Mississauga APPS Transport 7, New 1 Stone Ridge Road, Vaughan Accuristix 13, New GTA INDUSTRIAL MAP Lake Simcoe Georgina Brock Newmarket East Gwillimbury Caledon King Aurora GTA NORTH Whitchurch- Stouffville Uxbridge Scugog GTA EAST Halton Hills Milton 7 1 GTA WEST Brampton Mississauga 3 QEW Vaughan Richmond Hill GTA CENTRAL Markham 7 Pickering Ajax Whitby Oshawa 1 Clarington Burlington 7 3 Oakville Lake Ontario

10 For more information on this report, please contact Avison Young: Bill Argeropoulos Principal & Practice Leader, Research (Canada) avisonyoung.com Michael Nangle Research Associate 15 Avison Young Commercial Real Estate (Ontario) Inc., Brokerage E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young. Acknowledgement: Data for graphs, charts and tables used in this report are sourced from Avison Young and Altus InSite. Some of the data in this report has been gathered from third party sources and has not been independently verified by Avison Young. Avison Young makes no warranties or representations as to the completeness or accuracy thereof. Avison Young 77 City Centre Drive East Tower, Suite 31 Mississauga, ON L5B 1M5 T F