What continues to drive the GTA industrial segment
Growing e-commerce sales, coupled with the need for greater inventory space, continue to stimulate the industrial property market in the Greater Toronto Area, according to Avison Young.
At just 1.6%, the GTA industrial segment’s availability rate is markedly lower than the national average of 2.4% – making the region one of the tightest markets not just in Canada, but in North America as well.
“Developers are challenged to keep pace with the ongoing demand. The majority of new space is leased up before completion,” Avison Young said in its Q1 2021 Industrial Market Report covering the GTA. “In the first quarter, 2.6 million square feet (msf) was delivered, of which 2.2 msf (87%) was leased.”
And while 10.3 msf of industrial space is currently under construction, as much as 7.1 msf (approximately 69%) has already been leased.
“The online order fulfilment process requires much more space than traditional warehouse and distribution uses, as a larger stock of easily accessible inventory needs to be stored within these facilities,” Avison Young said. “Recently it is becoming common to see mega-sized fulfilment centres (in excess of 1 msf) to meet this need.”
Citing projections from eMarketer, Avison Young said that e-commerce sales will likely comprise 10.1% of total retail sales in Canada next year, before growing further to 11.7% by 2024.
These levels are significantly higher than the 8.7% share seen in 2020, translating to “exceptionally strong leasing and investment transaction activity (and compressed cap rates) as well as increased competition for available land.”
“The sector has also benefited from its occupiers largely being deemed essential services, strong rental collection, and rental growth relative to other commercial real estate asset classes,” Avison Young said.
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