The Industrial Boom: Surging Rates in the West GTA Markets
Over the past 12 years, the industrial real estate sector has experienced a remarkable surge in lease rates. Previously, the average market rent stood at $5 net, whereas today, we are seeing an average rate of $18.40. These figures reflect the overall rate across the West GTA, which includes Mississauga, Brampton, Oakville, and Burlington.
Given that vacancy rates remain below 1% in most markets, with an average of 0.5% across the West GTA, it is difficult to envision rates decreasing due to the substantial demand for space. Although several developments are currently planned or under construction in these markets, it will take some time before this new product comes to market. Once they are delivered, however, this may alleviate the vacancy rates slightly, potentially leading to a moderation in the rate of growth. Nonetheless, I anticipate rates to continue their upward trend, with the possibility of stagnation throughout 2023.
The accompanying graph illustrates the significant surge in rates over the past 12 years. Overall, since 2011, industrial rates in the West GTA have increased by an astounding 354%. Following the pandemic alone, there has been an 89% surge in industrial rates. This level of growth is unsustainable, and tenants who are currently approaching lease renewal can expect a substantial price increase. Over the past 5 years, which represents the average industrial lease term, industrial rates have risen by 267%. While some tenants have managed to absorb these increased rates and maintain viable businesses, continued growth at this pace may render that increasingly challenging.
If you have any questions feel free to reach out to myself, Philip Vargas or email me at philip.vargas@colliers.com