Toronto Can't Handle a Resurgent Manufacturing Sector. Here's Why
The GTA saw 1.5M SF of large-block distribution facilities leased up in Q1, more than all of 2014 combined. But, the bulk of the action is focused on big-box spaces, leaving a lack of smaller-scale buildings to accommodate a resurgent manufacturing sector.
"Most product available now is designed for service-based industries,” explains Colliers International VP Peter Garrigan, noting e-commerce is driving development of properties over 200k SF, particularly in GTA West. Ikea recently leased 400k SF at 3275 Argentia Rd in Mississauga, while at 100 Ironside Dr (below) in Brampton Exel Logistics took 420k SF and H&M leased 300k SF. Meanwhile, manufacturing, spurred by a weak loonie, is making a comeback. But size requirements in the sector have shrunk. “Five years ago we’d see manufacturers lease 100k or 200k SF," says Peter. "Now it’s around 50k SF.”
The GTA has limited supply of buildings that size to handle the growth. “Manufacturing’s taking a back seat,” says Peter, who doesn’t anticipate new manufacturing-catered projects arriving any time soon. “We’re definitely not going to see developers building manufacturing space on spec.” There’ll need to be a flight to quality to higher-bay product by service-based companies currently occupying smaller spaces, freeing up their facilities for manufacturers. As it stands, amid rising land prices and development charges, “it’s nearly impossible for developers to make sense of building small-bay industrial buildings for manufacturers.”
This year will bring 5.3M SF of new industrial supply, with 95% of it expected in GTA West, including an 895k SF building at 8875 Torbram Rd in Brampton being built on spec by Carttera Private Equities. Only one development coming this year will be under 100k SF. But Peter predicts 2016 could actually see an increase in spec construction of smaller properties. Some developers are “definitely talking” about building 100k SF small-bay industrial facilities that they can divide up into 30k and 40k SF units, Peter says. “But no one’s pulled the trigger on that yet.”