The Greater Toronto Area (GTA) industrial market remains resilient, despite challenges in other sectors. This has translated to exceptionally strong leasing and investment activity (and compressed cap rates) as well as increased competition for short-term developable land and infill sites. Rental rates have continued to climb as demand outpaces supply – driving activity and interest in fringe markets surrounding the GTA.

From a high of 7.1% in first-quarter 2010, the GTA industrial availability rate has dropped steadily to the current low of 1.2% – below the national average and making the GTA among the tightest markets in North America.

Rental rates have grown by 74% in the past five years and low availability rates have offset the high land values and construction costs evident in today’s market. Given the supply-demand imbalance, the consensus is for continued growth across the GTA industrial markets for the foreseeable future. Given the rapid rise in rental rates, many landlords have opted to bring their listings to market unpriced. In the third quarter, 38% of listed available space was marketed without an asking rate. These tend to be premium product commanding net rents $2 to $3 per square foot (psf) higher than the average of listed properties with asking rates posted.

In the third quarter, 2.4 million square feet (msf) was delivered across nine buildings, of which 95% was leased. At quarter-end, 13.9 msf was under construction across 66 buildings, of which 50% had already been leased. Buildings under construction equate to a mere 1.5% of the GTA’s existing industrial stock. Projects currently under construction are almost evenly split between design-build (46%) and speculative (54%) developments. Pre-construction developments total 53.5 msf in 152 buildings across the GTA. The GTA West leads the way with 60% of pre-construction opportunities, followed by 22% in the North and 9% in each of the Central and East markets.