Industrial space inventory available at a record high of 1.2%

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Windsor’s industrial real estate market hit record price levels in the second quarter of 2022 even as residential prices retreated.

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Statistics released by commercial real estate firm CBRE for the quarter showed that prices per square meter for rentals and sales both jumped around 33% from the same period last year.

The rental space is $9.74 per square foot while the purchase price was $141.16 per square foot.

“There isn’t a lot of supply of industrial space in Windsor and across the province,” said CBRE Windsor senior vice president Brook Handysides.

There must be new construction to meet the demand

It will be a long time before we can add to the offer that would create options for businesses to have more leverage in negotiations with landlords.

“However, there is a difference of over $100 per square foot between Windsor, GTA and other major markets. For those looking around the province, Windsor still offers decent value.

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CBRE's Brook Handysides is pictured at a newly leased industrial site on County Road 42, Wednesday, August 17, 2022.
CBRE’s Brook Handysides is pictured at a newly leased industrial site on County Road 42, Wednesday, August 17, 2022. Photo by Dax Melmer /Windsor Star

By comparison, the cost of renting space in London is $8.65 per square foot, while Toronto is $15.09 and Waterloo is $10.10. The average selling price per square foot in Toronto is $370.35, in London $198.44 and in Waterloo $219.30.

The national average selling price per square foot hit a record high of $254.88.

Available space in Waterloo is 0.4%, Toronto 0.8% while London saw a slight increase in space at 1.3%. The national vacancy rate is 1.6%.

Handysides said demand for local industrial space has grown steadily since 2014.

During this period, rental rates have increased by an average of just over 11% per year, while sales prices per square foot have increased by more than 15% per year since 2017.

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“I think there’s been a negative outlook in the Windsor market in the past, but that’s changing,” Handysides said.

“The region is associated with the automotive industry, which can be one of the most volatile sectors. However, investors see things differently now that they have seen the amount invested in the redevelopment of the electric vehicle sector and the battery factory will create a whole new ecosystem.

A newly leased industrial site on County Road 42 is pictured Wednesday, August 17, 2022.
A newly leased industrial site on County Road 42 is pictured Wednesday, August 17, 2022. Photo by Dax Melmer /Windsor Star

Demand for industrial space saw 97,000 square feet absorbed by the Windsor market in the second quarter, leaving the local vacancy rate at 1.2%. That’s a drop of 0.89.

The largest available space is Ford Motor Company’s 1.2 million square foot Windsor engine plant, followed by the 500,000 square foot former Nemak aluminum casting plant.

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Handysides expects the rise in interest rates to have an impact on the market in the short term.

“I think there will be a bit of a hiccup as investors get a sense of where things are headed,” Handysides said.
“With inflation and rate uncertainty, investors will look to sustainable assets. Land is one of those and we are seeing investors hoarding land to hedge for the future.

However, Handysides still expects a busy second half and an even busier longer-term future.

A newly leased industrial site on County Road 42 is pictured Wednesday, August 17, 2022.
A newly leased industrial site on County Road 42 is pictured Wednesday, August 17, 2022. Photo by Dax Melmer /Windsor Star

Currently, there is 50,000 square feet of space under construction in the Windsor area, but all of this space is already pre-leased/occupied.

However, Handysides expects more new construction to come online as the region has just entered the phase where the impact of the new NextStar battery factory, Stellantis’ retooling of Windsor Assembly, an Amazon fulfillment center and the arrival of other companies in the automotive supply chain will be felt.

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“The spotlight is on Windsor because of all the recent good news,” Handysides said.
“We’re just starting to see interest from out-of-town and overseas investors who will be here to support the redeveloped Windsor Battery Plant and Assembly Plant. We have yet to see the full impact of this and there are more important announcements to come. »

  1. Brook Handysides, left, and CBRE's Brad Collins, pictured in front of a recently sold commercial property on Hawthorne Drive, Tuesday, January 25, 2022.

    Demand for industrial property is high in the London and Windsor areas: CBRE Author of the article:

  2. The former Toolplas Systems building on North Talbot Road in Oldcastle is shown on Thursday 2nd September 2021.

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  3. Tony De Thomasis, Chairman and Chief Executive of Essex Terminal Railway, is shown inside one of Morterm Limited's huge warehouses in Windsor on Tuesday February 1, 2022.

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To meet growing demand, Handysides expects to see new builds start to take off in the near future.

“There has to be new construction to keep up with the demand,” Handysides said. “There just isn’t enough supply for what’s going to be needed.”

dwaddell@postmedia.com
twitter.com/winstawaddell

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