- What New supply is driving up vacancy and availability in the industrial market in southwestern Ontario
- Why The region is benefitting from a spillover of GTA industrial users looking for cheaper deals
- What next Another 3.1m sq ft is set to come online before yearend, driving vacancy up further
Southwestern Ontario is seeing a rise in vacancy and availability in the industrial sector as a wave of new supply has hit the market, JLL said in a Q2 report for the region.
According to the brokerage, 1.1m sq ft of new space — 79% of which was vacant — was delivered during the period. Overall, vacancy rose 100 basis points quarter over quarter to 3.6%, while the amount of available space increased to 4.8%.
“Year to date, there has been 3.28m sq ft of new space delivered to the market … and an additional 5.06m sq ft currently under construction,” the firm said in the report.
JLL said the upward trajectories of vacancy and availability will continue as another 3.1m sq ft of new space is set to be delivered this year. That will lead to increased competition for new class-A space, the brokerage said.
Scott Figler, JLL’s head of research for Canada, said that influx of supply is allowing commercial tenants to be more discerning about property options, compared with past years when vacancies were below 2%.
Southwestern Ontario has seen a “spillover” of GTA industrial users, who are increasingly looking westward in the province for property deals, Figler said.
“If you’re an industrial user or you’re looking for a distribution centre or a warehousing spot, for a long time it was so expensive in the GTA and finding the land to build on was difficult,” Figler told Green Street News. “Southwestern Ontario, it’s basically an extension of the GTA, so it’s natural … you would find more space [there].”
In terms of transaction activity, JLL said that owner-occupier deals remain active. Across all submarkets, there were 18 deals larger than 10,000 sq ft.
“The Bank of Canada’s policy interest rate decrease of 25 bps in June provided some positive sentiment and momentum, and further cuts could have a meaningful impact on sale transaction volumes,” it said.
Notable vacant sales during the quarter included Oaklake Enterprises purchase of a 45,000 sq ft property at 65 Goddard Crescent in Cambridge from a developer for $12.2m, or $272/sq ft. And High Performance Glazing bought a 59,000 sq ft building in Paris from a numbered Ontario company for $9.5m, or $160/sq ft.
