There used to be a time when the question of where to lease warehouse space for your business depended solely on the main factors such as cost, transportation proximity, labour pool, property features, and selection of options. If you were ok with paying a little bit of a premium but looking for better transportation access and a larger labour pool, you would usually locate in the most popular industrial markets in the GTA - Mississauga, Brampton, Vaughan, or Markham. Those are sort of the big four in terms of available supply and in terms of providing many of the features businesses have traditionally looked for, such as those mentioned.
Note - I didn't include Toronto on that list, and though there are decent industrial pockets in Etobicoke and North York they are not generally as abundant in newer supply and the larger spaces that many Tenants are looking for these days.
Secondary Industrial Real Estate Markets in the GTA
If you were ok with sacrificing a little bit on location and/or access to labour, you could save a few bucks by locating in one of the GTA secondary markets - a few examples including Oakville, Burlington, Newmarket/Aurora, and even as far North as Barrie.
Times have changed, and the key distinction is not so much the factors that were driving the decisions around where to locate, but more so the fact that it's no longer a choice anymore for many businesses. Due to historically low vacancy rates in Canada's major cities - in some cases below 1% - there just isn't enough supply to satisfy the demand for industrial properties, especially warehouses, in the most sought-after markets.
This means that what was once an act of free will with companies choosing Secondary Industrial Real Estate Markets for various reasons has now become an absolute necessity. It has become quite common these days in the most sought after markets (Mississauga, Brampton, Vaughan, Markham) for your average occupier of industrial space looking for a 20,000 SF warehouse, for example, to be competing in multiple offer scenarios on those types of properties usually within a few days of them hitting the market.
As a result, so many businesses have had to consider leasing spaces that may be a little bit farther from their transportation routes, or farther from their suppliers, customers, or labour pool. This has had the ripple effect of pushing up demand, and hence prices, in those secondary markets as well. However, there is still a cost benefit of locating outside of one of the prime zones.
Lease Rates in Primary and Secondary GTA Real Estate Markets
Below is a breakdown of average triple net lease rates from January 1, 2022 to the publishing of this blog post on May 1, 2022 in several of the GTA's primary and secondary industrial property markets. These numbers were collected only for smaller buildings up to 25,000 SF in order to reflect the type of product that many privately owned small and medium-sized businesses are looking for.
Vaughan - $17 PSF
Markham - $16 PSF
Mississauga - $15 PSF
Brampton - $15 PSF
Oakville - $15 PSF
Newmarket/Aurora - $12 PSF
Burlington - $12 PSF
Barrie - $11 PSF
I can tell you as someone with boots on the ground in the GTA industrial property market every day that the prices listed above actually skew on the lower side from what we're seeing right now, and are likely biased down by lower prices earlier in the year. As an anecdote, I'm helping several clients look for warehouse space in Mississauga and the going rate on most properties that are in decent shape is in the $16-19 PSF range.
Regardless, these numbers are all relative and as you can see there is a definite drop-off as we start to look at markets such as Newmarket/Aurora, Burlington, and Barrie. We can add in other secondary markets such as Hamilton into the mix which from what I've been seeing falls into the $10-12 range.
Choosing The Right Industrial Space For Your Business
If it were only as easy as deciding to relocate further afield and finding a great industrial space at a great price, that would be fantastic. But unfortunately, it's just not that simple. By virtue of less favourable proximities and historically lower demand - and hence less development - the secondary markets don't tend to have as much stock of industrial warehouse properties as the primary ones do. So although the competition is less fierce, and the lease rates are generally more favorable, it can sometimes take a bit of time for the right space to come along.
The most important thing is to keep an open mind. I've advised my clients that we should absolutely still compete in the most sought-after markets, even if it means we lose out on a few, but at the same time, we should keep an eye on other options that they perhaps may have not considered in the past. It's this balanced plan of attack that will allow you to find the right industrial space for your business in a timely fashion and hopefully without breaking the bank.
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