Having the lowest industrial vacancy rates in the country and a robust demand for industrial space, the Metro Vancouver and Greater Toronto areas top the list for industrial land prices in Canada. In the beginning of 2018, the average price per acre in each market was selling at $1.6 and $0.9 million, respectively, according to JLL Canada.
Vacant industrial land is diminishing quickly across Canada. To keep up with the steadily increasing demand from industrial users, land continues to be developed at a growing pace. From 2014 to Q1 2018, the Canadian industrial market averaged 3.8 million square feet of deliveries and 14.4 million square feet of space under construction per quarter.
This continued stream of new constructions, coupled with a fast-decreasing industrial vacancy, is pushing land prices upwards. The average price per acre increased by 58.7 percent to $952,240 since 2014.
“The thirst for suburban and urban land and industrial capacity from institutional buyers, private developers and occupiers alike have created a perfect storm and a fury of demand,” comments Chris Denda, senior vice president and practice lead for JLL Canada’s National Industrial and Logistics platform. “Almost every transaction sets a new price benchmark and necessitates continued bullishness on rental rate growth for buyers to stay competitive.”
Despite these record rates, appetite from investors remains strong and could lead to a total absorption of the industrial land supply in Metro Vancouver by 2030. In the GTA, developers are purchasing land with existing buildings and redeveloping them. For instance the recent acquisition by OPTrust of a 15.25-acre site at 307 Orenda Road in Brampton featured a 240,000-square foot building that was redeveloped into a new 341,130-square foot space.
“While the narrative when speaking about industrial land in Canada has been centered around the GTA and Metro Vancouver, and the upward pressure these markets have felt in regard to their average price per acre, land rates are actually on the rise nationwide,” says Ben Wedge, senior Analyst, JLL Canada. “We’re also seeing new types of land uses, for example, cannabis related, that could push average land prices further up in some markets like those in Alberta.
Alberta, which is expected to lead demand from cannabis producers, is already seeing new cannabis development projects including Aurora Cannabis’s newly constructed 800,000-square-foot facility in the Edmonton Area.
As land continues to diminish across Canadian Markets, land values are expected to further increase. However, the extent and pace of this increase will largely depend on rental rates’ growth. If it is slow, demand from developers may drop because their return on investment might not be as profitable.