A new trend in the GTA’s commercial industrial space is following in the footsteps of the residential sector with what have been dubbed “industrial condos.”
Just as it’s become well-nigh impossible for the average homebuyer to find freehold homes, thereby pushing them into the high-rise market, industrial tenants are increasingly priced out of warehouse facilities and they’re opting for what Diana Hoang, Colliers’ industrial specialist, has called the industrial market’s condominium equivalent.
“Industrial condos are similar to multi-tenanted industrial units; there are a lot of industrial buildings out there that, in order to satisfy groups that could pay for their own space, are essentially smaller units,” Hoang told CREW. “Industrial buildings are becoming difficult to attain and developers are turning larger buildings into smaller units for occupiers so they can buy those units.”
In fact, the popularity of these units is such that most units don’t even make it onto the MLS before they’re sold, she added.
“Eighty-percent of our transactions are for larger developers converting bigger buildings into smaller units,” said Hoang, “Developers would pay a premium for a 70,000 sq ft industrial building—you’re paying about $200-250 psf. They’re not even posted on MLS; they don’t even hit the market before they transact. We’re finding a lot of properties get a flood of buyers before they even hit the market.”
The availability rate for industrial units is a paltry 1.8% in the GTA, and while e-commerce and food warehousing demand have increased during the COVID-19 pandemic, they had already been major market drivers before the coronavirus sparked mass shutdowns. Nevertheless, with an overabundance of prospective buyers and escalating property costs, smaller, individual units, all housed beneath one roof, are the way the industrial market is trending.
Moreover, the scarcity of land on which to develop warehousing facilities has ignited a rush for resale properties that have extensive acreage, and bidding wars have become commonplace as a result.
“Land is being bought quickly and there are bidding wars on farmland,” said Hoang.
Neil Sharma is the Editor-In-Chief of Canadian Real Estate Wealth and Real Estate Professional. As a journalist, he has covered Canada’s housing market for the Toronto Star, Toronto Sun, National Post, and other publications, specializing in everything from market trends to mortgage and investment advice. He can be reached at neil@crewmedia.ca.
