Tenants are facing mounting pressure as net rents reach record-breaking heights
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The demand for Canada’s commercial and industrial properties is such that their absorption rates have begun mirroring the trends in the red-hot housing markets – and this development is especially apparent in Toronto, according to a new report by real estate services and investment company CBRE Group.
Supply of industrial space has reached a historic low of 3.9% in 2018, and conditions have tightened in 8 out of 10 major commercial real estate markets. Industrial net rent has reached its highest levels ever at $7.21 per square foot in the second quarter of this year, the CBRE report stated.
“Availability in Canada’s major industrial markets continue to plummet, which is putting pressure on tenants,” CBRE Canada executive VP and GTA regional managing director Werner Dietl told the Financial Post.
Toronto’s desirable location and demographic make-up have made it the most constrained commercial and industrial market in North America, with availability levels at a mere 2.2%.
Read more: Toronto city budget enjoying substantial boost from commercial segment
However, this same robust demand for commercial and industrial space has stimulated a 47.1% increase in construction activity nationwide, CBRE added. E-commerce, food distribution, and warehousing were the segments that drove the greatest demand for these properties.
“It’s no secret that e-commerce is driving a lot of activity globally. With the change in of how people are shopping, we’re seeing a shift in how retailers are running. We also see it in the food sector, which is showing investments in more effective distribution,” Dietl stated.
Location has become a core consideration for these spaces, with the ideal being situated nearby major highways and population centres. This is leading markets like Montreal to boost their transit capacity to accommodate increased commercial operations, CBRE explained.
