Avison Young on market's performance in Q4 2023
The Greater Toronto Area (GTA) saw an uptick in industrial availability in the fourth quarter of last year with rental rate growth pausing for the first time in over two decades, according to a new Avison Young report.
The company’s latest market report indicates that the GTA experienced an overall increase in industrial availability in Q4, up 80 basis points (bps) from last quarter and 190 bps year over year.
All GTA markets saw industrial availability rise: GTA East (2.5%, +120 bps), GTA West (3.8%, +110 bps), GTA Central (2.3%, +30 bps), and GTA North (2.3%, +90 bps). Key leases included National Logistics Services’ 620,000-sf new lease in Caledon, Proactive Logistics’ 451,000-sf lease also in Caledon, and J.D. Smith and Sons’ 250,000-sf renewal in Vaughan.
Demand in the GTA continues to centre around logistics and distribution, with an increased focus on manufacturing and food/grocery sectors, the report said. The average asking net rental rate dipped slightly to $18.37 psf, marking the first rental pause since Q2 2017. Yearly increases were notable: 7% YoY, 83% over three years, and 151% over five years. The highest average net rents were in GTA North at $19.97 psf, while GTA East had the most affordable rates at $15.29 psf.
Q4 saw 8.8 million sf completion across 39 buildings (33% leased) in the GTA. The largest completion was a 1,092,600-sf distribution center in Milton. Construction activities across 44 buildings totalled 11.3 million sf, primarily in GTA West (37%) and North (31%). Pre-construction stages in 155 buildings indicate a potential addition of nearly 54 million sf (21% already leased) across the GTA.
Market trends in the regions
In the Central market, available space rose by 30 bps quarter-over-quarter in Q4, with Toronto at 3% and East York at 1.5%. Average asking net rental rate dropped to $16.85 psf, down 3% YoY. Toronto’s rents peaked at $20.00 psf, while Etobicoke hit $15.20 psf.
Notable deals included Ready Spaces’ 134,400-sf lease and the GTA portion of Olympia Tile – Shelborne Capital National Industrial Portfolio sold for $43 million. No buildings were completed, but 1.2 million sf were under construction, mainly in Scarborough (49% of Central market’s under-construction pipeline).
In the East market, availability grew 120 bps to 2.5% in Q4, with average asking rent at $15.29 psf, up 8% YoY and 101% in three years. UPS leased 185,500 sf, while SkyRise Prefab leased 90,600 sf. Notable sales included 660 Monarch Avenue for $20.3 million and 435 Finley Avenue for $14.6 million. Three buildings completed totalled 956,000 sf (33% leased), while six buildings were under construction (26% leased).
GTA North’s availability rose 90 bps to 2.3% in Q4, with average rents at $19.97 psf. Notable leases included J.D. Smith and Sons’ renewal and Dream Unlimited’s purchase of two distribution facilities. Eleven completed constructions totalled 1.7 million sf, and 15 buildings (41% leased) were under construction, mainly in Vaughan (54%).
The West market saw availability increase 110 bps to 3.8% in Q4. Average asking rent dropped to $18.60 psf. Notable leases included National Logistics Services’ deal for 620,000 sf. Twenty-five completions totalled 5.6 million sf, with 4.2 million sf under construction (30% leased). A further 64 buildings are under pre-construction stage.
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