Industrial lease prices have shot through the roof and industrial land prices have doubled in some Canadian markets. Here’s why, plus an overview of the current commercial real estate market and projections for the future.
Situation
Half of Canada’s markets have essentially run out of industrial space, and many of our tightest markets (e.g. Toronto) don’t have enough serviced land zoned for industrial use.
According to the 2021 Industrial Figures Q4 report, the national industrial availability rate fell below 2% for the first time in recent history. With less space to go around, rental asking rates have skyrocketed, increasing by 10.9% (YOY) nationally, and as much as 32.3% in markets like Montreal.
Industrial sale prices have also exploded across the country, doubling in markets like London, Ontario, and rising to above $400/sq. ft. in Vancouver, Toronto, Ottawa and Montreal. Nationally, the average asking sale price has increased by a whopping 27.9% year-over-year.
Significance
Until recently, industrial lease terms ran from 10 to 15 years, but in a (scorchingly) hot market with (pitifully) low vacancy rates, many landlords are opting for much shorter leases — in the ballpark of 3 to 5 years — so that they can charge higher rents to renewing tenants, or to new tenants.
Obviously, this can be disruptive for businesses, both in terms of planning and stability, as well as overhead expenses. Many businesses will end up passing their rent increase along to the consumer, who’s already grappling with the worst inflation in 40 years.
Solutions
Construction activity has increased nationwide, with 36.2 million sq. ft. of industrial space currently under construction. But — and it’s a big but — nearly 70% of commercial industrial real estate under construction is already pre-leased! This means businesses in need of space will need to act fast (or go back in time) to secure a spot.
Equal to Canada’s housing crisis, the persistent shortage of serviced land zoned for industrial use is a key driver of current market conditions. Without a tremendous effort to increase viable industrial space — which means developing unserviced industrial land and overhauling the onerous zoning restrictions and bureaucratic red tape that delays getting shovels in the ground — there is simply no way out of this affordability crisis.
As commercial real estate availability continues to plummet amidst increasing demand, the industrial real estate market in Canada is expected to get even hotter. This will be great for landlords, but increasingly painful for businesses.
Results
Squarefoot Commercial Group is committed to purposeful development. Serving the Barrie and Simcoe County region for more than 60 years, our commercial realtors work with buyers and sellers, as well as with landlords and tenants, to secure fair and equitable terms. We believe in honesty, integrity and community.
Whether you’re looking to buy commercial real estate, looking for industrial vacant land for lease in Barrie or looking for commercial industrial real estate for lease, Squarefoot’s commercial real estate experts can help.
Contact Squarefoot Commercial Group to learn more about our approach, find land for lease in Barrie, view our current commercial real estate listings, or find out how we can help you achieve your commercial real estate goals.
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