A newly released Colliers International report shed light on the frenetic activity occurring in commercial real estate markets throughout the country.
The report’s findings could conceivably spur more broker activity in the commercial sector, as recent regulations have cooled the residential market.
The report examined Toronto, Montreal, Vancouver, Ottawa, Calgary and Edmonton, and Craig Hennigar, Director of Market Intelligence at Colliers International Canada, says industrial growth usually parallels the growth of cities.
He also says there’s up to a 95% correlation between population growth and demand for industrial space.
According to the last Census, the population has grown over a million people in the country’s largest markets, with Toronto in particular seeing an increase of 344,976 between 2011 and 2016.
“Online retail is fueling large fulfillment centres, particularly in major markets like Toronto,” said Hennigar. “A second one is in North America, in particular, called the ‘last mile,’ for a fairly large number of orders for a fairly narrow number of products because they’re so popular. There’s a move to capitalize on smaller warehouses for some companies. Areas like South Etobicoke and Rexdale, where warehouses 40 years old that don’t meet modern standards for high efficiency, computerized fulfillment centres or as manufacturing facilities, but they’re great from a locational perspective.”
The point of ‘last mile’ facilities is to be close to customers for same-day or one-day delivery.
In spite of the correlation, Vancouver has seen a decline in demand for industrial space, however, Hennigar says it’s likely because Vancouver is a port city and “most goods going through Vancouver leave Vancouver” by train for cities like Chicago.
Montreal ‘s industrial sector has seen a spike, as well. Industrial rents are rising, and even demand for office space is surging. “Economic growth has been positive,” said Hennigar. “Montreal has a large number of highly-qualified graduates who want to stay in that city.”
Office space is also surging in Toronto, a city currently experiencing a building wave, and where mixed-use developments are the norm. CIBC will soon move into the 49-storey Bay Park Centre tower that’s currently in development.
“The whole South Core of Toronto popped out of nowhere,” said Hennigar. “The question is what might or might not occur that will have influence? New buildings will drive firms from existing buildings to newer facilities.
“If you go up to Bloor and Yonge, you get more mixed use. There’s a notion towards building more live, work, play.”
Other variables could impact the commercial sector, he added.
“We don’t know how immigration will be affected by the unaccommodating atmosphere south of the border,” said Hennigar. “Toronto is attractive, and Vancouver in the ‘90s had satellite tech offices out of Silicon Valley because they can bring in immigrants easier than they can in the U.S. It will be interesting to see if Canada benefits from restrictive immigration policies in the U.S.