In its Industrial Real Estate Market Report, Newmark Knight Frank Devencore reported that vacant space in industrial properties across the Greater Toronto Area (GTA) was steadily absorbed through 2011 and into the first months of 2012, and availability rates are now approaching the low levels that existed prior to the 2008-2009 global economic crises. The overall availability rate in the GTA has dipped into the 5.0 – 5.5 per cent range, and average asking rents were in the $4.15 – $5.15 per square foot range, depending on the region.
“Demand is relatively high for larger distribution and warehouse spaces as retail and industrial interests continue to converge, particularly in the case of e-commerce businesses, where the need for comprehensive distribution networks is increasing,” said Rob Renaud, senior vice president and managing principal at Devencore Realties Corporation Canada Limited, Brokerage. “As is the case elsewhere in the country, the current inventory of industrial space in the GTA cannot meet this demand. However, another positive sign in the GTA industrial market is the resumption of activity among developers, which speaks to the extent of tenant demand that we have seen. There have been a number of land trades in GTA West as well as some speculative construction.”
Space availability varies somewhat in the GTA’s main industrial submarkets. In GTA West, for example, availability rates are among the highest, registering in the 6.0 – 7.5 per cent range. In the Central GTA region, on the other hand, availability rates are tracking at a very low 3.5 – 4.0 per cent.
Across the rest of the country, availability rates also declined through 2011, dipping well below eight per cent. With resurgent activity in the oil and gas sector, western cities, including Calgary, Winnipeg and Edmonton continued to register the lowest industrial vacancy rates in the country.
“We anticipate that securing spaces of 250,000 square feet or greater will continue to be a challenge, and that there will be upward pressure on asking rents in these buildings,” Renaud said. “At the other end of the spectrum, demand for smaller spaces will likely remain steady over the next six months. As availability rates decline, the better leasing opportunities will be found in specific buildings or from specific landlords. To take advantage of the remaining softness in the market, tenants are well-advised to look at their lease restructuring and blend and extend options.”