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Industrial real estate undersupplied despite construction hike: Avison Young

DCN News Services
Industrial real estate undersupplied despite construction hike: Avison Young

TORONTO — Canada’s industrial real estate market is expected to remain active throughout 2019 with restricted supply posing challenges for occupiers and investors, Avison Young has reported in its spring 2019 Global Industrial Market Report, released May 8.

Nationally, the industrial sector remains undersupplied — demand is outpacing new development and will continue to do so, even though almost twice as much space is under construction compared with spring 2018, stated a release. The supply-demand imbalance has pushed rental rates higher in almost all markets, attracting investors and resulting in low yields and rising asset values.

Canada’s industrial market began 2019 on a strong footing, building on the strong results achieved in 2018. While Vancouver and Toronto remain key markets for occupiers and investors, scarcity of product was evident in the single-digit vacancy rates posted across the country in the first quarter of 2019.

Canada’s industrial vacancy rate remains at a historic low, ending first-quarter 2019 at three per cent, down 70 basis points from the same quarter in 2018. Ten of the 11 markets surveyed reported lower vacancy year-over-year and single-digit vacancy rates, with four markets posting rates below the national average.

In the North American context, Canadian markets — Vancouver (1.2 per cent), Toronto (1.5 per cent) and Ottawa (1.6 per cent) — recorded the three lowest vacancy rates through the first three months of 2019.

“E-commerce remains the industrial sector’s catalyst for success as retailers and developers strive to perfect the supply chain,” said Mark Fieder, Avison Young’s COO, Canadian operations, in the release.

Online giants such as Amazon are impacting market dynamics in terms of scale and location with their demand for large distribution/fulfilment facilities near urban centres, resulting in rising land and development costs amid dwindling supply of developable land.

Fieder added, “This situation is most apparent in Toronto and in Vancouver, where strata units increasingly offer the only opportunities for developers to justify their land costs. A focus on multi-storey facilities may be the next logical step to make the most of restricted urban sites.”

The report covers 64 industrial markets in seven countries across the globe.

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