October 18th, 2022 | Case Study
It is no secret that the Greater Toronto industrial market has undergone a significant transformation in recent years.
Where in the not-too-distant past, industrial rents hovered around $5 to $6 PSF net and properties traded in the $100s PSF range, we now see new developments offered at minimums in the high-teens or early-twenties per square foot while industrial assets are acquired for an average price of close to $400 PSF, depending on the asset and location. Further, industrial land that sold for $400,000 per acre is now offered anywhere from $3M to $5M per acre.
Riding this upswing in appreciation has been a highly profitable venture for investors, even as land, labour, and material costs, along with interest rates, continue to push upward. Despite what many may believe, the biggest issue for developers, today, is in securing shovel-ready land.
Although swathes of agricultural and recently-designated-but-unserviced lands are being carefully acquired with plans for the medium- and longer-term, much of the low-hanging fruit within the GTA core have been taken. Any remaining parcels may be had, albeit, at a significant premium, and with development charges and a myriad of other line items threatening the feasibility of the projects themselves.
As developers systematically comb through each of the submarkets, we have noticed a trend to the west and north; deep into York, Halton, and Peel Regions, and spilling into Hamilton, Niagara, Guelph, Brantford, and Waterloo.
Both Tenants and Developers are moving west in their search while trying to retain access to Canada’s largest market. In some cases, there may be less obvious opportunities in secondary or tertiary markets which abut urban centres and/or are connected via major transportation routes. And although this strategy may take a developer into a typically lesser-known municipality, it is because of this that they may uncover tremendous upside and value.
With that said, read on to learn how Lee & Associates Toronto helped an active and established Developer acquire a well-located parcel of industrial land along the Queen Elizabeth Highway in Grimsby, Ontario – with plans to construct over 700,000 SF of space just 20 minutes from the GTA boundary and less than an hour from downtown Toronto.
Challenge: Anatolia Capital Corp. was looking to purchase high-exposure industrial lands surrounding the Golden Horseshoe with the intent to quickly develop an industrial park. As a result of the expertise and activity of Lee & Associates Land Services group across the Greater Toronto Area, they were tasked with uncovering and qualifying any suitable opportunities.
Features: • Approximately 35.15 acres • Zoning: General Employment, Industrial • Direct exposure to QEW Highway • Grimsby, Ontario • Sold Price: $56,350,000
Transaction: Lee & Associates Land Services group sought off-market, industrial zoned, mid-sized land parcels in close proximity to major highways across the Greater Toronto Area. Following an extensive search with our real estate intelligence team, we identified a site which already had plans to develop up to 750,000 square feet – with construction slated for early 2023.
We determined trending market sales in the area and underwrote an intensive development pipeline survey encompassing the surrounding Hamilton, Burlington, and Niagara area, and determined the limited supply forecast for the area in 2023. Our analysis concluded the subject lands offered a competitive advantage over many of the other sites given the readiness and existing services already in place for development, allowing it to capitalize on a robust leasing demand environment.
Results: Following an extensive underwriting program, our team successfully negotiated an off-market transaction on behalf of the Buyer to secure the property.
Anatolia Capital Corp. is actively going through the planning process to develop up to three buildings comprising over 700,000 square feet, with the intent to speculatively build their first two properties of 285,000 square feet each in early- to mid-2023.
Lee & Associates Toronto will be launching the project on behalf of Anatolia Capital Corp. in the coming weeks. For more information, please contact our team.
“Thank you to Lee & Associates Toronto in helping us secure this amazing site in a very competitive market. Having great exposure on the QEW, and located between Toronto and major USA Crossings, this will be a great opportunity for any corporation looking to service their customers in Toronto and the United States.”
– Bekir Elmaagacli, Co-CEO, Anatolia Capital Corp.
Summary Overall, developers are continuing to search for well-located lands to capture the insatiable demand for speculative industrial development. E-commerce and logistics businesses are hungry for space in a sub-1% vacancy market and, despite the economic uncertainty, are pre-leasing a substantial portion of developments coming on-stream. Despite this demand, developers desire to understand the competing pipeline of projects and how any potential saturation within submarkets may affect the potential success of any future offerings.
Furthermore, in many cases, sites must undergo re-zoning and/or servicing in addition to obtaining all necessary permits and site plan approvals. This process often involves many moving pieces and can be complex to navigate without the guidance of a team of specialists. It is because of these same factors that may result in opportunities being missed or passed over.
Our team of experienced agents, along with our real estate intelligence support, are able to help investors and developers identify and underwrite potential opportunities, helping them maximize the odds of success and speed to execution. For guidance on the acquisition and development process, or for an expert opinion on your current situation, please contact us.
Land services best practices, local expertise, and market intelligence across North America Lee & Associates Land Services team of commercial real estate professionals in Toronto includes some of the top land brokers in the GTA and Southern Ontario. Their expertise in land use and zoning, valuation, development charges, severance process, land entitlement, and disposition provides our clients with an extensive knowledge of local market conditions, as well as important development trends and regulatory issues. Today’s land investor has specific acquisition strategies that may require; outside storage zoning, serviced and ready land for development, or high-density residential infill sites in specific GTA sub markets. Commercial land values have appreciated substantially, so if you are considering selling or acquiring a small commercial land parcel or large agricultural property, our Land Services team will obtain the maximum sale value or help you develop strategies for long-term holding or future development.
We Offer Solutions: • Site Selection • Project Management • Construction Services • Portfolio Management • Lease Negotiations • Building Purchase and Sale • Debt / Mortgage Sourcing • Property Management