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As some CRE sectors struggled to stay afloat during the pandemic, the industrial CRE market in the Greater Toronto Area started thriving. The demand for industrial space has never been higher. Vacancy rates are at an all-time low, standing at a little over 1%, driving the core GTA industrial market expansion to the east and north.
The resilience of the industrial sectors has attracted a lot of attention, and experts predict that we’re in for a new CRE industrial revolution.
The Growth of E-commerce Drives Demand for Industrial Space
The pandemic has forced many businesses to adopt new technologies and invest in digitization. Transitioning to e-commerce was the only way for countless small businesses to stay profitable during lockdowns and closures and ensure their survival.
The massive shift to e-commerce has caused a boom in many support industries as well, including personal deliveries and packaging supply. The rise in these industries has driven the demand for more warehousing and logistics space.
According to Peter Millesse, CBRE industrial advisory senior director, for every billion dollars spent on e-commerce (and its supporting industries), there is a need for 1.25 million square feet of distribution space.
While the demand and supply of industrial CRE space are currently on par, the expectations are that the Greater Toronto Area (GTA) will need an additional 42 million square feet of industrial space by 2025.
A Need for Greater Vertical Storage Capacity
With the rising interest in warehousing solutions, we can expect to see significant changes in industrial buildings and their properties. The biggest trend at the moment is increasing clear heights.
For new industrial buildings in the GTA, the height of 40 feet is quickly becoming the norm. A few development projects are even going up to 90 feet and using wider spacing between columns to ensure greater flexibility and less interference.
Owners and tenants are focusing on optimizing their industrial space and making it as efficient as possible. They are adding features like LED lighting with motion sensors and skylights. To improve employee retention and safety, they’re also adding valuable amenities such as gyms, prayer rooms, recreational areas, and more.
Within a few years, industrial buildings in the GTA will look nothing like they do today.
The GTA to See Massive Industrial Expansion
The core GTA industrial market has traditionally been concentrated in the west. However, the heightened demand for distribution and logistics facilities is pushing the expansion of the industrial market to the north and east.
There is more available, affordable land outside the western GTA, so markets around Durham and Hamilton are quickly taking off.
Summary
In the next year alone, we are expecting to see 15 million square feet of new industrial development in the GTA. The industrial CRE market in Canada is thriving, making it a worthwhile investment for any savvy investor.