Toronto continues to offer slim prospects for industrial space seekers — registering a mere 2 per cent availability rate at the end of September — even though more than 2.7 million square feet of new supply has come onto the market since June 30. CBRE’s newly released third quarter statistics also reveal reduced industrial availability in Vancouver, Edmonton, Winnipeg and Montreal over the course of summer 2020.
Nationally, CBRE pegs the average availability rate at 3.5 per cent across the 10 major markets it surveys, ranging from Toronto’s Northern American low of 2 per cent to 9.7 per cent in Calgary. Only Halifax and Ottawa recorded increases in availability, as more than 6.7 million square feet of industrial space was absorbed nationally during the third quarter.
Average net rents slipped marginally from $9.17 to $9.16 per square foot, but the average sales price climbed at a steeper angle, from $156.41 to $159.57 per square foot. Booming e-commerce trends underpin the robust numbers and are believed to be fueling new purpose-built construction as tenants foresee fewer releasing opportunities at turnover.
“There remains a lack of readily available top-tier logistics facilities across Canada,” CBRE analysts observe.
“Investors, tenants and developers recognize that e-commerce and logistics demand are here to stay and they’re making big forward-looking industrial commitments,” concurs Paul Morassutti, CBRE’s vice chair.
The 10.4 million square feet of space now under construction in Toronto is expected to make a relatively small dent in demand, and lease out well ahead of completion. Q3 2020 was the 14th consecutive quarter that average net rents increased, edging up this time by $0.05 to reach $9.76 per square foot. Year-over-year, the average net rent has climbed by about $1 per square foot, largely due to more pronounced spikes in the fourth quarter of 2019 and first quarter of 2020.
In addition to Toronto, Montreal and Vancouver also record industrial availability rates of less than 3 per cent. Vancouver added 803,000 square feet of new supply during the third quarter, but still saw a 10 basis point drop in the availability rate, taking it down to 2.8 per cent. Average net rent dipped down $0.07 per square foot to rest at $13.52. Approximately 4.3 million square feet of new space is currently under construction.
Montreal’s industrial availability rate now sits at 2.5 per cent after a further 10 basis point slide during the summer. On the flip side, average market rent has increased by more than 27 per cent since 2018. The most recent quarter saw a $0.05 increase, pushing average net rent up to $7.19 per square foot. More than 792,000 square feet of space was absorbed in the same period. About than 241,000 square feet of newly completed industrial space came onto the market and 1.4 million square feet is currently under construction.
“Given the recent demand for industrial product, developers have become more confident in the city’s warehouse and distribution market, resulting in an uptick in the number of projects currently in the planning stages of development,” CBRE analysts report.
“The Canadian industrial market hasn’t missed a beat,” Morassutti reflects. “In fact, it has unprecedented momentum and is truly the rock star of the commercial real estate world right now.”