Demand for warehouse and distribution space has spurred industrial land sales in the Greater Toronto Area (GTA) throughout the COVID-19 upheaval, keeping deal volume almost on par with 2019 activity. CBRE reports 507 acres at a total value of $342.2 million transacted during the five months from April to August, compared to 560 acres at $362.4 million in the same period last year.
Logistics and e-commerce fulfillment operators with aggressive timelines to get their facilities built are snapping up sites that can be developed within the next 18 months, while institutional investors with longer horizons appear content to acquire well-located properties that may not be ready for build-out until later in the decade. Either way, CBRE executive vice president Matt Brown suggests it illustrates confidence in e-commerce that could see it nudge out bricks-and-mortar retail as the perceived highest and best use for development land.
“End-users are really pushing the market, competing with developers and driving up pricing,” he notes. “Owners are now looking at retail centres and saying: I can convert some of this into warehousing and lease it to industrial tenants.”
Residential land sales also quickly pulled out of a COVID-19 inflicted stall early in the lockdown to eventually tally $1.2 billion for the April to August period. Nearly 880 acres traded across the GTA, with low-density tracts for single-family residential emerging particularly strongly. Some market observers speculate that COVID-19 is undermining the allure of denser downtown living and, through its work-from-home regime, convincing prospective homebuyers that it is possible to live at a long distance from their employment base, and recent new home sales trends line up somewhat with that theory.
“People are out there buying homes, virtually and in person. They must have faith in their jobs and in the overall economy if they’re buying single-family homes,” muses CBRE executive vice president Mike Czestochowski. “This is giving developers a push to buy the land to build more of them.”
Still, it doesn’t appear that high-rise condominium developers are running scared.
“The market was operating closer to normal than you would expect,” reports CBRE executive vice president Casey Gallagher. “Condo developers were contracting sales in core and non-core locations at market pricing, which has given confidence to others.”