Perimeter Development and Crestpoint Real Estate Investments are set to build new industrial facilities on the old Budd Automotive site in Kitchener. (Courtesy CBRE)
Buying and developing industrial land is happening at a crazy fast pace in Southwestern Ontario as prices and rents keep climbing, pushing investors further west from the Greater Toronto Area (GTA).
“Volumes are very, very high relative to historical numbers,” Joe Benninger, vice-president with CBRE’s Southern Ontario investment team, told RENX. “It’s extremely tight out there. In 2021, the vast majority of opportunities, both large and small, were gobbled up.”
CBRE reports that last year saw 12,496 acres of industrial, commercial and investment (ICI) plus agricultural land trade for $837 million across Waterloo Region, Wellington County and Brant County. That’s nearly double the amount from 2020.
EDITOR’S NOTE: This is the first of two articles about the industrial development boom in SW Ontario. Part II will cover what’s happening near Hamilton airport.
Benninger pointed out that in Waterloo Region new lands became available after a long time without any serviced land coming onto the market-that’s a big reason for the huge jump.
“There are lands that have come on stream in the Sportsworld/Maple Grove area of Kitchener and Cambridge that were a very long time coming. There are more lands downstream that are in the official plan. The planners need to figure out a way to accelerate getting those serviced.”
Waterloo Region industrial land deals
Big industrial land sales last year in Waterloo Region included:
– Broccolini buying about 105 acres around Old Mill Road and Allendale Road in Cambridge for $55.24 million from various sellers;
– Crestpoint Real Estate Investments Ltd., teaming up with Perimeter Development Corporation to buy a 38-acre parcel from the former Budd Automotive site at Homer Watson Boulevard and Bleams Road in Kitchener for $21.15 million;
– furniture maker Krug acquiring a 23.7-acre spot on Pearson Street also part of Budd Automotive’s old property for $14 million;
– Dream Industrial REIT picking up 28.5 acres on Maple Grove Road for $26 million.
Benninger said lots of potential tenants want space at Crestpoint and Perimeter’s project where they tore down existing buildings to start fresh.
“That’s indicative of most of these planned developments. They’re leased up before a shovel ever hits the ground.”
The Dream purchase worked out close to $1 million per acre.
“Those are lands that could have been bought at any time over the last decade or so, probably for about $500,000 an acre,” said Benninger. “They certainly had interest, but no one stepped up to the plate to meet the seller’s expectations. In 2021, the seller ran a marketing process and ended up with five or six bids and achieved just under $1 million (an acre) for them.
“I think you’ll see Dream service those lands and move forward with some development there. That site’s a little bit challenged in terms of its shape. It’s not the perfect shape and size, so it probably would have gone for more than that if it was.
“There are (also) other parcels in that area where you’ll see some other groups move forward with development.”
Land prices and rents continue to climb
The price of ICI land has usually been cheaper here compared to GTA but it’s shooting up quickly thanks to strong demand.
If you go west of Toronto prices drop off but still properties have sold above $2 million an acre near Milton and over $1 million farther west too-and Benninger thinks they’ll keep going higher.
“Institutional industrial developers are buying for both short- and longer-term pipelines for construction,” said Benninger. “The underlying fundamentals for industrial throughout Southwestern Ontario really make it favourable for industrial development and construction.”
The building pipeline is growing in Waterloo Region including projects like i Port Cambridge-a massive 300-acre logistics hub expected to deliver over four million square feet across several phases.
A lot is also happening around Brantford which offers good connections to GTA plus Hamilton.
Said Fiera Real Estate funds grabbed five industrial buildings totalling about 940,000 square feet there last spring paying roughly $118 million from local developer Vicano Construction Ltd.
The spaces ranged from roughly 12,000 square feet all the way up to one big distribution centre at 530,000 square feet finished back in 2020.
You can expect Vicano will keep building more industrial places not only inside Brantford but elsewhere across Southwestern Ontario as well since they own more land ready for future projects.
All this building still isn’t enough though-the available space remains super low which keeps pushing rents higher across Southwestern Ontario.
