KingSett Capital, Crestpoint Real Estate Investments, and Panattoni Development join Colliers to analyze the market signposts
Last July, there were 47 industrial lease property listings in the GTA, according to Colliers data. By May 2023, that number grew to 292 listings. That's more than a five-fold increase. Meanwhile, the amount of total space available in the market increased from about 5 million square feet in July 2022, to 13.5 million square feet currently.
That's just one snapshot of the market provided during a live-audience Colliers Talks recording in Toronto led by Victor Cotic, Executive Vice President, National Investment Services with Colliers.
Matt Johnson, Managing Director, Investments with KingSett Capital; Wade Dobbin, partner at Panattoni Development Company; and Kevin Leon, president and CEO with Crestpoint Real Estate Investments joined Cotic for the discussion.
They focused on four key pillars of the GTA industrial landscape: market rents, cap rates, land values and development — as well as the related challenges and opportunities the industry faces.
The panel covers the following topics:
Growth rates: Industrial rental rates had been climbing by about 15% year-over-year each year since 2016 in the GTA. Then, rates grew by 30% year-over-year beginning in mid-2021. Given current market conditions, is there consensus on future growth?
Supply: New inventory has been constrained while demand has been growing, especially stoked by e-commerce logistics and last-mile delivery. It is possible that lease rates could keep rising, but it’s not yet clear how high is too high for the market to bear.
Cap rates: Cap rates in the market have moved up this year, closing the spread with five-year Canada Bond rates. The panelists forecast where they think the market will drive cap rates to next.
The buyer pool: A year ago, there might have been 15 qualified bidders seeking a class-A industrial space in the GTA. Today, that qualified bidder pool is about half that. The less-frothy market means groups previously priced out are starting to discover more opportunities.
Financing: Interest rates have touched the highest mark Canadians have seen since 2001. The panelists discuss where borrowing costs will go from here and assess whether overall building values will keep pace with elevated financing costs.
Zero Carbon: The corporate demand for zero-carbon or zero-carbon ready buildings has been solidifying and growing in the last couple of years. That means industrial developers and owners are doing themselves a disservice if they're not already competing in that space. It's time to future-proof the GTA's industrial inventory.