Toronto's Industrial Market Stays Strong As Economy Wobbles
Despite global trends downward, Toronto’s healthy industrial real estate market is showing few initial signs of slowing down in 2020, according to a new quarterly report from JLL.
The 2020 Q1 Toronto Industrial Insight report says that the GTA market is continuing with a theme of impressive growth.
Average net rents climbed to a new high of $9.55 SF, up 20.9% year-over-year. Vacancy rate also matched a historic low after dropping 10 basis points to sit at 1.2%.
“Things have been overwhelmingly positive in the industry,” JLL Vice President of Industrial Bill Bates said. “The fundamentals in Toronto were strong going into the coronavirus. And for the most part, they haven’t missed a beat.”
The report found that new completions this quarter totaled 1.1M SF, down notably from 2019 Q4’s 6.2M. However, 10M SF of construction completions are expected for Q2 and Q3.
But the report notes the uncertainty of the coronavirus has added a volatility to the market. Prime example? The recent government moratorium on nonessential construction.
“This puts many of [construction] completion dates into question, especially if work stoppages linger for months,” concludes the report.
Toronto’s statistics compare well to the overall Canadian figures, where construction increased 1.5M SF to 26.7M SF. Rental (up 12.9%) and vacancy rates (steady at 2.7%) were also strong.
Bates said the coronavirus crisis has benefitted the Toronto industrial market in some ways, particularly when it comes to larger spaces focused on e-commerce and essential retail industries.
“Toronto’s reputation as a distribution hub has grown,” Bates said. “And not just in Canada but the rest of North America.”
Of course, a lack of space remains a major obstacle for the market. As does rising rental rates. Bates said the 21% uptick in net rents (to $9.55 SF) in Toronto is actually overdue.
“For a long time in Toronto, we’ve had a stable market. No rent growth," he said. "Toronto had a lot of catching up to do,” he said.