Canadian Industrial Real Estate Blog

Calgary / Edmonton – Clearly the most frantic industrial construction activity across Canada is in Alberta. They are the proverbial definition of demand outpacing supply when it comes to land that is readily available for industrial development. Although you can stand at the observation deck of the Calgary Tower and look out at seemingly endless acres of vacant land ready to be developed for the ever-expanding requirements for distribution centres and transportation hubs to feed the West. Reality is that large parcels of land are difficult to come by available at all and users are forced to set-up shop in the townships of Rocky View and Airdrie which are located approximately 10 – 30 kilometers respectively away from the CBD and costs range from $350,000 to $450,000 per acre.

Toronto – The largest transportation and logistics hub in the country comes with it’s own set of large challenges including the availability of large parcels of land. Growth has been exceptional in the Greater Toronto Area (GTA) industrial real estate markets since 1995 with the focus of expansion being on the Northwest municipalities of Vaughan, Mississauga, Brampton, Oakville and Milton. With what is known as the Oak Ridges Moraine (an ecologically sensitive geological landform that spans 160 kilometers across the North section of the GTA) being a no-fly zone relative to development to the North, Lake Ontario to the South and a marginal interest in large industrial developments to the GTA East, the only place to grow is West. Mississauga, Brampton and Oakville are effectively out of large blocks of land that are easily available for purchase which has forced further travel West along Highway 401 and The Queen Elizabeth Way to Milton, Halton Hills. These areas are located within approximately 15 kilometers of the CBD, offer availability to services immediately and typically trade within a range of $375,000 to 450,000 per acre. Municipalities such as Kitchener/Waterloo, Guelph, Brantford, and Woodstock are frontiers that are starting to emerge as future development communities of choice. Typically located 30 – 40 minutes away from the CBD’s, employment lands here typically range in price from $300,000 to $350,000 per acre.

Land is becoming scarcer by the year as demand clearly outpaces supply. This is most evident when it comes to employment lands (land that is used for purposes of commerce) surrounding the major centres throughout North America. As our focus is transportation and logistics, we are best to examine industrial buildings and the changes to land requirements that are developing due to the ever-growing size of the logistics industry. Single industrial buildings are growing to a size rarely heard of before in Canada and as such we regularly see buildings being constructed that are up to 700,000 square feet. All of this growth is causing serious constraints on suburban municipalities and the individual provinces trying to keep pace with demand. These issues add up to one eventuality – increased cost. A few of the key components of information surrounding the subject of employment land and the direct impact on it’s cost are availability, where future employments lands will likely be developed, locational proximity to customers and employees - typically described as the nearest Central Business District (CBD), and when services (water, sewers and hydro) will be available. The naxte 4 blog posts provide a brief commentary on employment lands throughout Canada with a particular focus on large parcels exceeding 20-plus contiguous acres.  

Montreal – The largest city in “La Belle Province” has seen moderate demand for industrial buildings and therefore growth of development lands throughout the last decade. Other than specific local developers, few have endeavored to construct speculative buildings in the hope of tenants deciding to pursue a flight to quality. Instead there has been a steady growth based predominantly on steady organic growth of local and national industrial building users. As a result land costs have climbed in a manner more akin to steadiness than a panicked or rushed manner. The general availability to purchase a large parcel of land within city limits is non-existent, which has caused developers and end users to seek future employment land development in areas such as Vaudreuil and Laval. These general areas are located within approximately 20 kilometers of the CBD, offer availability to services immediately and typically trade within a range of $150,000 to $225,000 per acre. 

As populations continue to grow outside of the major centres, it seems that the growth of new arrivals within the cities keeps pace. The one similarity is that they all need a place to live, often in new homes and/or condo’s built to accommodate accordingly. The fundamental difference of course, is that development in the suburban areas typically happens on green-field land (land that has never been developed upon in the past) and urban development takes place on land that has had a previous use.  

One of the shining trends that has been occurring on a frequent basis over recent years is the redevelopment of industrial (otherwise known as employment) lands that used to be home for manufacturing uses. As a large part of our collective manufacturing sector continues to move to more economical locales, the vacated properties are being bought by residential developers who take these properties through a rezoning process with an end goal of having them become zoned for residential in the future. Developers are following much of the planned objectives of the local governments within these cities who have  a strong desire and need to provide housing. The generally accepted terminology for this re-zoning trend is Residential Intensification. 

Further trends are developing amongst the industrial sector in a manner that is less about re-zoning and more about the desire for what is now considered a “coveted” zoning designation. The zoning designation is often referred to as M2, which allows for outside storage. As we continue to grow into more of a consumer nation, which is more reliant on services and distribution and less so on manufacturing, we find that corporate uses in the industrial sector are seeking distribution centres.

Naturally, distribution of most given product requires trailers to haul the goods. Often these trailers are stored while they wait to be filled and utilized accordingly. When these trailers sit outside and not up against a shipping door of an industrial building, they are most often designated as being stored, hence the requirement for a specific zoning allowing for this storage. Wise are the 3^rd party logistics providers and corporate supply chain departments that see these trailers as an opportunity to utilize the space within these trailers as a cheap way to store product without paying the rents being demanded by landlords and/or accordingly, the taxes reaped by government(s).