Factors to Consider While Buying or Leasing an Industrial Unit in GTA
Updated: Sep 5
Here are the most common factors you should consider while buying or leasing industrial units in GTA
So you're ready to lease or buy an industrial unit either for your business or as an investment. What kinds of things should you look for in terms of the physical structure, beside the financial considerations like purchase price or lease terms? I'll break down a few of the factors below that tend to be the most common items considered by my clients.
This is an obvious one, but one of the most important. Size will often dictate how you can use the space as well as how much rent you'll pay (as a Tenant) or how much rent you'll collect (as a Landlord). But it's not just total square footage that's important - just as important is how the square footage is allocated between industrial space and office space. For some users, a space with 50% office is too much and not worth the cost and effort of restoring it back to warehouse industrial. For other users, that much office space may be desirable. In my experience, the most popular office to industrial ratio is usually something like 20/80.
Known as the space between the floor and any object overhead (beams, suspended lighting, fire protection systems), this is basically the usable height for the occupier. For example, the amount of height that can be used for racking and product storage. Newer industrial buildings have higher and higher clear heights, commonly above 30 ft, while older buildings can be as low as 11 ft, but with most in the 14-25 ft range. Higher clear heights are desirable for investors and end users for a variety of reasons, not the least of which is the usability it provides. Some uses will require specific clear height minimums due to storage or manufacturing requirements. Some clear heights even provide enough space to build a mezzanine or semi second level for additional storage and usable space. Better clear height does not come without a cost though, literally - the higher the clear height, the higher price a property will command both on the sale and lease market.
Truck-level and Drive-in Doors
Many users will require at least one truck-level loading door or drive-in door in an industrial space. There are some older units that don't have either, and those tend to be much less desirable for users and investors as a result. With a greater square footage, the expectation for the number of such doors also increases, and ideally a space will have at least one of each in order to provide the greatest flexibility of use. For occupiers, due to the nature of their business some will require specifically one or the other or both. Another consideration with truck-level loading docks is whether there is enough space behind the building for 53 ft trailers to maneuver and back up to the door. Not all properties will have the required space for this.
Having sufficient electrical infrastructure in place can be critical for end users of industrial space. Most newer spaces will have 600V power though, so this is often not a deal-breaker for most buyers or tenants.
Though many industrial end users don't require street exposure and signage, or don't have the same client demographic requirements when it comes to location as retail users may have, location still plays a critical role. For industrial, location factors into things like proximity to clients and suppliers, proximity to transportation routes such as highways, and proximity to a good labour pool. These are critical factors for end users. Location also has an impact on purchase or rent price, and so assuming all other factors can be satisfied, that plays into purchasers and tenants decisions as well.
Freestanding, Shared, or Industrial Condo
This one usually depends on the size of the unit in question - for example, it's rare to have freestanding buildings less than 5000 or 6000 sq ft at minimum, and though demised space and industrial condos can get pretty large, there is a size threshold above which more of the properties tend to be freestanding. Freestanding properties definitely command a premium when it comes to sale and lease prices, and it's fairly obvious to see why. There is appeal to having ownership and control of the entire property, not having to account for common areas, and not having to worry about condo corp rules or condo fees (maintenance costs will exist regardless, though there is something psychological for buyers about paying condo fees). Freestanding properties also provide more usable space and potentially more parking around the structure, as well as the potential for development or redevelopment opportunities in the future.
This isn't a structural issue per say, but it does have huge physical implications for the property and its use. Many of my clients underestimate how big of a factor zoning plays in determining which properties will be a viable option for them or not. This is one of the first things I look at when assessing a property for a client, especially an end user, because if the zoning doesn't work then it's really not a viable option in most cases (yes zoning can be amended, but let's not even get into that here). I'll likely write a blog article in the near future just on zoning, because it plays such a critical role in commercial real estate, especially for industrial and retail properties (not so much office).
This isn't always critical for many end users, and usually industrial properties will have sufficient parking spaces for staff that are working at the business, but it can be an issue for certain uses. For example, with recreational industrial uses where they expect to have customers attending the property daily, parking needs to be strongly considered, both in terms of practicality (whether there are enough spots comfortably), and in terms of zoning (whether the parking capacity will allow the use) - sometimes, even if a property is zoned for a certain use, it may not have the minimum number of parking spots to allow that use, so both of these factors must be verified with the local zoning by-law.
This is not an exhaustive list, and there are obviously many other factors and nuances that are considered by buyers and tenants of industrial properties, but this gives you a high level idea of some of the most common considerations (besides financial) that I look at for my clients.