Canadian Industrial Real Estate Provides Needed Excitement In Hard Times

February 5, 2021 4 Minute Read

Canadian industrial real estate provides needed excitement in hard times

Amid all the upheaval in the commercial real estate world over the past year, Canada’s industrial markets have been solid as a rock.

A pandemic-driven surge in e-commerce and logistics activity has fueled unrelenting demand for fulfilment centre space. Canadian markets witnessed the drawdown of 10.4 million sq. ft. of industrial space nationwide in the fourth quarter of 2020, well above the quarterly five-year average of 6.0 million sq. ft. And developers remain bullish on industrial projects, with 26.8 million sq. ft. of additional space under construction nationwide at the end of 2020.

Toronto, the nation’s top industrial market, saw its availability rate hold steady at 2.0% for the third consecutive quarter, despite the infusion of 12.1 million sq. ft. of new industrial supply into the market in 2020—the largest recorded amount of new construction in a single year.

Vancouver’s industrial availability rate fell to 2.3% and Montreal posted its lowest industrial availability rate ever: 2.1%. Not so long ago, Montreal was seen as being held back by its aging stock; now it’s one of the top-performing industrial markets in the world.

Even Canada’s smaller cities are showing industrial strength. Halifax reported a record-high 449,000 sq. ft. drawdown of industrial space in Q4, bringing that city’s year-end absorption total to a 13-year high of 569,000 sq. ft.

“We can’t build industrial space fast enough,” says CBRE Canada Vice Chairman Paul Morassutti. “And while there’s a huge amount of new supply on the way, until then, industrial users will need to be creative to keep up with customer demand, including optimizing existing facilities and converting older industrial spaces.”

When it comes to creativity, Carttera’s Steeles Bramalea Centre (SBC), merits mention. Located on a site that previously housed the Simmons Bedding Co. headquarters and manufacturing plant, the new infill development, located across from a GO Transit station, will retain both the industrial and office components.

SBC will include a 373,000 sq. ft. state of the art industrial building, with 40’-clear height and 50 trailer parking positions. And there will be two standalone office buildings, one 20,000 sq. ft. and the other 10,000 sq. ft.

“It’s quite a unique scenario,” says CBRE’s Chris Bournakas, who is representing the project. “This could be a great opportunity for a company to have its manufacturing and head office functions located on a self-contained, transit-oriented campus.”

See this related article MORE OUTLOOK 2021:   Calgary  |  Edmonton  |  Halifax  |  Toronto  |  Waterloo   |  Vancouver

Industrial elsewhere

The GTA is firing on all cylinders on the industrial front, and it’s the same story in markets across the country.

In Edmonton, industrial projects are far and away the most active property type from a leasing perspective. Amazon has taken four facilities there and national groups like U-Line Shipping Supplies and Fountain Tire are expanding into the market.

“It’s all about supply chain and logistics,” says CBRE Edmonton Managing Director Dave Young, adding that there’s also growing demand for industrial space to support the agricultural sector in Northern Alberta. “We’ve got some of the most fertile land in North America running from Grand Prairie to Southeastern Saskatchewan. So there’s going to be a big push there from a local food supply point of view.”

Calgary is seeing virtually every major retailer (Amazon, Canadian Tire, Home Depot) scouting for locations to set up distribution warehouses there.

“Calgary is centrally located and can service all of Western Canada and the Northwest U.S., as well,” says CBRE’s Alberta Managing Director Greg Kwong. “I expect more demand from users in that regard. And these are large-bay users, 100,000 sq. ft. or more.”

"Halifax has sub 6% industrial vacancy and we didn't see any significant new supply in 2020. The market is craving the next wave of industrial development."
Andrew Bergen

Across the country in Halifax, CBRE’s Andrew Bergen says there is essentially no new industrial space for lease.

“We’re sub 6% vacancy and didn’t see any significant new supply in 2020, so that's really the push now: the market is craving the next wave of industrial development.”

And on the West Coast, in Burnaby, Oxford just started construction on Canada’s first multi-storey distribution centre, an especially innovative solution to creating more space in the nation’s most constrained industrial market.

“Everybody’s interested to see the activity on that project and which types of tenants it lands,” says CBRE’s B.C. Managing Director Jason Kiselbach.

Kiselbach notes that the Vancouver film business has picked up slack from a lot of other industries that have struggled this year.

“I’ll be watching for the demand there and what impact that will have on the industrial market long-term,” he says. “We've seen some industrial sites sold for development of purpose-built studios for the first time in many years.”

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