QuadReal has purchased two low-rise buildings at 1149 and 1153 Queen St. W. in Toronto with the assumed intention of redeveloping the site into a multi-residential property.

The 0.64-acre, mixed-use-zoned site was owned by artist Ben Woolfitt. He previously operated an art supply store in the building at 1153 Queen that has commercial and retail space on the ground level and 10 residential units — all occupied — on the floor above it.

“He saw the potential of what the next phase of this property could be,” Lennard senior vice-president Vincent King, who brokered the off-market deal with sales representative Gabriel Irinici, told RENX.

King originally connected with Woolfitt in 2018 when the artist first thought about selling, but King said price expectations at the time were unrealistic. Ensuing efforts by other parties to get a deal done were also unsuccessful.

But the two men stayed in touch over the years and Irinici re-engaged the vendor a year ago, learning that his pricing expectations were more realistic.

Bringing QuadReal into the picture

The Lennard colleagues thought Vancouver-based QuadReal, a global real estate company that has assets under management valued at more than $77.6 billion, would be a good fit to acquire the property.

“They understood this node and have a proven track record . . . and we wanted to make sure that the group that we brought to the table was a group that was going to be true to their word and operate in good faith,” King said of QuadReal, which declined to be interviewed for this article.

The vendor and purchaser settled on a price of $24.25 million.

“The process of finding the right buyer and figuring out all of the details that would actually get a deal done took a while,” King explained. “But once we had the right group and were working with QuadReal, the deal actually happened very quickly.

“From getting the deal under contract to a closing date was inside of 60 days, which in the development world is a pretty quick deal.”

The neighbourhood and property’s current usage

King said QuadReal liked the Queen West neighbourhood as a proven node for both purpose-built rental and condominium properties, and it also has lots of stores, restaurants and bars nearby. It’s on the Queen streetcar line and the future King-Liberty GO Transit station is planned for just south of the site.

“It’s one of the largest parcels of land remaining on all of Queen West, with 233 feet of frontage,” King said. “There are very few development opportunities of this calibre left in the City of Toronto.”

There’s approximately 4,000 square feet of vacant commercial space at 1153 Queen, where the other tenants are a dental clinic, a convenience store, a tattoo parlour and a cosmetic/medical business.

There’s a cannabis store and a second-floor artist studio in the smaller neighbouring building at 1149 Queen.

Potential future use for site

“There’s a good amount of lease term on everybody, but we’re confident that QuadReal will be able to put its plans in motion when the time’s right,” King said.

King didn’t want to speak on behalf of QuadReal as to what those plans might be, but said: “Especially around transit, you’re seeing an increase in densities getting approved.”

Canada Post sold its 122-year-old former post office building just to the east at 1117 Queen St. W. to Queen Street Post Inc. for an undisclosed price in December 2021.

While much of that two-storey, 11,354-square-foot heritage building will be maintained and used as a community space, the new owner has proposed building a 29-storey, 272-unit residential tower above and behind it.

“I can’t say if that type of density will be achieved, but I think it’s fair to say that we’ll see more density and potentially more height than one would have expected in the past in this area,” King said.

Source Renx.ca. Click here for the full story.

Commercial mortgage broker and capital advisory firm Oakbank Capital Group was instrumental in arranging a $148.8-million construction loan from KingSett Capital to Brixen Developments to push forward a new Mississauga condominium development.

“A lot of the conventional lenders, being the big banks, have de-risked in a certain sense in that they’re not offering clients the same types of financing or the same structure of financing they would have historically,” Oakbank managing partner Jonah Brown told RENX.

“That has been a big catalyst for our business, in that everyone is looking for more unique structures or quicker funding timelines.”

Brown said Oakbank has funded around $1.4 billion so far this year and has around $700 million of commitments signed that it will close out before the end of the year.

That being said, Oakbank has also become more selective. It isn’t looking to be involved with any agreements that don’t have a high degree of certainty to produce positive outcomes for the company and its clients.

“As a result, we’re doing a lot more legwork up front to ensure the deals we take are high-calibre,” Brown said.

Brixen’s Exhale development

Brown said most institutional lenders cap their loans in the $50-million to $60-million range, so Brixen found the opportunity to work with a single lender for Exhale Residences very attractive.

“We do a lot of business with KingSett and we have nothing but good things to say about them, their platform and their capacity to execute,” Brown said, “and they came through and did the whole load.”

The project involved, known as Exhale, will be an 11-storey, 284-unit condo at 1381 Lakeshore Rd. E. Its amenities will include: a furnished lobby with an adjoining work lounge; indoor and outdoor gyms; a children’s playroom; a party room that includes a full kitchen and private dining room for 10 people; a rooftop terrace with barbecues and views of Lake Ontario; and a co-working space.

Ground was officially broken at the site in August. Occupancy is expected in the fall of 2026.

Brixen didn’t reply to requests to be interviewed for this article before it was written.

Residential, industrial asset classes are most active

Toronto-based Oakbank was launched in February 2022 and has arranged more than $3 billion in loans across Canada since then. Its core offerings include construction, bridge, mezzanine, Canada Mortgage and Housing Corporation (CMHC), and term loans. It customizes financing for properties ranging from $5 million to $450 million.

“CMHC has become and has continued to be a large part of our business,” Brown explained. “I think as the condo market has slowed down, a lot of developers are looking to build rental. Some are building conventionally and some went right to CMHC at the outset. Both are options in the market.”

Industrial, purpose-built rental and condominium residential are the most active asset classes that Oakbank is involved with financing, while it has also been involved with some office property transactions.

Brown cited a $62-million bridge loan it arranged in May involving two office buildings at 45 and 47 Sheppard Ave. E. in Toronto. The purchaser viewed it as a redevelopment play, thus it was seen more as a land loan with holding income rather than a traditional office transaction.

More options than just the major banks

Expert advice and advisory services become increasingly valuable as the commercial real estate market becomes more challenged, according to Brown, as companies are forced to look for a larger variety of capital sources.

“When people think of financing, I think the intuitive thought is you think the big five banks, when the reality is there are 70-plus lenders across Canada looking to invest in commercial mortgages,” Brown said, offering a snapshot of the current lending situation.

“Everyone has different risk appetites, everyone has different snack brackets, and our job is to keep a pulse on that market and know who’s looking to invest in what at any given point in time.

“And even though a project may not be a fit for the big five banks, we can almost always find someone that does have that risk appetite and pair the right capital.”

Source Renx.ca. Click here for the full story.

Amazon will add 79,000 square feet of space to one of its Toronto offices by November and plans to open the North Tower of its Vancouver office complex in 2026, the company announced Thursday afternoon.

The tech giant made the reveals as it opened a 43,000-square-foot atrium at its flagship office building The Post in Vancouver, and launched its first high-tech Just Walk Out store in its YYZ14 office at 120 Bremner Blvd. in Toronto.

The expansion will take place at its YYZ18 office at 18 York St. in Toronto, where three new floors will be opened. Across Amazon’s three Toronto offices the company currently occupies approximately 500,000 square feet of space (excluding the upcoming expansion). It provides employment for approximately 3,500 staff members.

The Post has 1.1 million square feet of office space across its 21-floor South Tower and 22-floor North Tower linked by the just-opened atrium. Over 4,500 of Amazon’s employees work in The Post, where Amazon is the sole corporate tenant. The South Tower was opened earlier this year.

“Our investment in The Post reflects Amazon’s continued commitment to our Vancouver Tech Hub,” Jesse Dougherty, Amazon’s vice president, said in the announcement. “This new space will be an ideal location for our teams to gather and invent on behalf of customers.”

Arkfield has acquired a seven-storey downtown Toronto mixed-use office building with long-term redevelopment potential from Dream Impact Trust for $23.7 million.

The 0.34-acre site at 10 Lower Spadina Ave. is occupied by a 62,163-square-foot building that, aside from a vacant former ground-floor Starbucks store, is fully leased with a 5.7-year weighted average lease term.

“One of our strategies in today’s market is owning income-producing, cash flow-positive assets,” Arkfield chief investment officer Rouh Ramezani told RENX. “Shorter term, the strategy is going to be focusing on the operation of the property. The tenants are high quality and we will operate the property to their standards.

“It’s the same with the ground-floor retail. We want to improve that retail experience in that area, given how great the location is in front of the park and the lake. We want to improve the operations of the asset to do justice to the location.”

The deal, brokered by TD Cornerstone Commercial Realty and CBRE, took about six months to close. Arkfield chief executive officer Ramin Jalalpour told RENX several bidders were interested in the property.

10 Lower Spadina’s redevelopment potential

The building’s tenant spaces and common area were recently modernized and underground parking is available.

The location at the northwest corner of Queens Quay West provides unobstructed views of Lake Ontario and offers convenient access to several nearby amenities, the Spadina streetcar, the Gardiner Expressway, Lakeshore Boulevard and Billy Bishop Toronto City Airport.

Toronto-based Arkfield is an integrated real estate group that owns, operates and develops commercial and residential assets in Ontario. Its portfolio totals more than 4.3 million square feet of residential density with an estimated completion value of $4.5 billion.

“Longer term, we will seek to find the best use for the asset and for that particular location,” Ramezani said.  “It could be a condo, a  purpose-built rental or an office. It’s too early to tell right now.”

The site has mixed-use zoning for office and retail, but would have to go through the rezoning process to be converted to residential use.

“This is not an asset we want to take to development immediately,” Jalalpour said, suggesting it could be five to 10 years before redevelopment is considered since the building is providing steady holding income.

The building’s page on Arkfield’s website shows a preliminary proposal for a 360,000-square-foot tower with 500 residential units.

Interest in site to the immediate north

Arkfield is also considering a possible future land assembly for the property. A 105-year-old City of Toronto-owned low-rise building immediately north of the site at 20 Lower Spadina Avenue could potentially be sold and Arkfield would be interested in acquiring it.

Jalalpour said his company has had initial conversations with municipal representatives about that possibility, but it’s still very early and the talks aren’t too serious at this point.

The 20 Lower Spadina building is currently occupied by Centre Francophone du Grand Toronto and Broad Reach Canada.

Arkfield’s development pipeline

Arkfield owns almost 20 income-producing and development assets, including several proposed multiresidential development sites along Yonge Street in north Toronto.

The most advanced of those is a condominium partnership with Tridel that’s in the pre-sales stage for a 14-storey, 246-unit building at 6080 Yonge St.

Arkfield is in the final stages of receiving zoning approval for a site at Yonge and Churchill Avenue where it’s proposing to build 45- and 33-storey towers with a combined 862 units and close to 14,000 square feet of retail space at grade.

“I don’t think we’re going to rush to launch this project anytime soon,” Jalalpour said, acknowledging the depressed state of the condo market at the moment.

Among the other development sites owned by Arkfield on, or close to, the north Yonge corridor are: 7-17 Nipigon Ave.; 7079 Yonge St.; 6200 Yonge St.; and 6125 Yonge St.

Arkfield’s investment strategies

Jalalpour said the company has capital available should a new opportunity come up to purchase another income-producing asset, with future redevelopment potential, similar to 10 Lower Spadina.

“We are an investment-oriented, sophisticated developer,” Ramezani added. “If you look at it from the finance and private equity real estate side, we are a more operation-heavy and development-heavy private equity real estate firm.

“We cover A to Z on land development projects. We have income-producing commercial projects. We have multires value-add and, of course, construction and the consumer products that we build.”

Source Renx.ca. Click here for the full story.

Summer is a hectic time, with a rush of both family and business commitments requiring our attention. It’s easy to miss big news … so as is our tradition at RENX, here’s our synopsis of our most-read, and most important, articles from the summer months.

2024 was a summer like no other in recent memory, with the Bank of Canada beginning a new cycle of interest-rate reductions, a paucity of major transactions in all the CRE sectors, and even uncertainty in the multifamily and condo sectors as the economy, costs and permitting issues continue to impact development. This despite rising demand for new housing across the country.

We’ve tried to include articles from a wide range of commercial real estate sectors and geographies in our summer review. We also note they are not presented in any particular order, though we have tried to group them roughly by sectors or locales.

And, a reminder / invitation: If you have a major transaction, development or other commercial real estate-related news to share with RENX readers, send us a note to let us know. In the meantime, welcome back!

Fengate makes $1.8B investment in eStruxture data centres:

Fengate Asset Management is making a “ground-breaking” $1.8-billion investment into eStruxture Data Centers to provide the company with capacity to expand its nationwide network. “The record-breaking investment is the single biggest to ever be made in the Canadian data centre sector . . .”

Altus to sell property tax service to Ryan, LLC for $700M:

Altus Group announced a definitive agreement to sell its global property tax business to international tax services and software provider Ryan, LLC for approximately $700 million as the firm continues to transform to a pure-play commercial real estate software, data and analytics platform.

Chartwell announces acquisitions of over $700M of Canadian seniors residences: 

Chartwell Retirement Residences just announced its latest acquisitions: 384 suites in three retirement communities on British Columbia’s Vancouver Island for $226.9 million. That adds to a long list of portfolio acquisitions in 2024, totalling over $700M.

CAPREIT bulks up liquidity with $740M portfolio sale to TPG:

CAPREIT is selling its Canadian portfolio of 75 manufactured homes communities to TPG Real Estate for $740 million, a move president/CEO Mark Kenney called a major step toward becoming a pure-play apartment REIT. It also announced an additional $477M in transactions, including $387M in Q2 acquisitions (https://renx.ca/capreit-bulks-up-new-apartment-buildings-477m-transactions).

Crestpoint, Anthem partner to make two major Vancouver acquisitions:

Crestpoint Real Estate Investments and Anthem Properties continue to expand their relationship, with Anthem announcing it is acquiring stake in a master-planned Crestpoint redevelopment at “the Boot” in Burnaby, B.C. The partners also acquired a Vancouver development site –  1318 Thurlow St. –  where they plan a 32-storey purpose-built rental tower (https://renx.ca/crestpoint-anthem-partner-to-acquire-vancouver-high-rise-dev-site).

Groupe Mach buys Montreal office tower from BentallGreenOak:

Groupe Mach purchased a 17-storey, 256,574-square-foot property at 1600 Rene-Levesque Blvd. W. from BentallGreenOak, in a deal that bucked the recent trend of few significant office trades. 1600 Rene-Levesque was one of the country’s largest office transactions during the summer.

AIMCo acquires $129M Montreal industrial portfolio from Pure:

Alberta Investment Management Co. (AIMCO) has acquired a five-building industrial portfolio in Greater Montreal for approximately $129.2 million. The buildings are in Lachine and Dorval and comprise approximately 455,000 square feet.

There’s big demand in Canada’s retail shopping centre market:

In a commercial real estate environment largely devoid of major transactions, one sector continues to surprise: retail. In the wake of media reports that Quebec City’s massive Galeries de la Capitale mall is for sale, another major transaction could be in the offing.

Retail rents continue to rise, little new space on the way:

Canadian retail real estate rents have continued to rise and, with little significant new supply on the way to meet demand, that trend is expected to continue, CBRE’s H1 2024 Retail Rent Survey states. A case in point were three Alberta shopping centre acquisitions by Crestpoint and Trinity Retail Fund (https://renx.ca/crestpoint-expands-alberta-portfolio-buys-3-shopping-centres).

Allied Properties’ debt downgraded to ‘junk’ by Moody’s:

Moody’s Ratings downgraded office owner and operator Allied Properties REIT’s senior unsecured debt rating to junk status, dropping it one level to Ba1 with a continuing negative outlook due to what the agency considers ongoing high debt levels.

Slate Office REIT receives notices of default:

Slate Office REIT’s financial troubles are continuing, as the trust announced it received notices of default for its revolving credit facility, and an expectation to also go into default on interest payments for three debentures.

Broccolini considers return to its roots: Rental housing development:

Broccolini is seriously considering a return to its roots by building rental housing for the first time in about 50 years as the condo market continues to slump, Michael Broccolini, CIO and president of the Montreal developer’s real estate group told RENX. Major projects in Montreal and Toronto would be affected by the move.

Greystar in early stages of Canadian expansion:

Greystar named John Wilbeck managing director of its Canadian operations as the U.S.-based firm moves to increase its presence north of the border. As part of the strategy, it is well underway developing a 593-unit multifamily rental project with over 110,000 square feet of grocery-anchored retail at its University Heights Shopping Centre property in Saanich, B.C.

Epic Investment Services execs become majority shareholders:

Epic Investment Services is now 100 per cent employee owned, with managing partner and CEO Craig Coleman and managing partner, CFO and COO Laetitia Pacaud becoming its majority shareholders.

KingSett affordable housing fund seeks to make a big impact:

The $180-million KingSett Affordable Housing Fund LP closed on the acquisition of Birchmount Green in the east end of Toronto and continues to push ahead with development and planning for other large-scale multiresidential sites in the city.

Source Renx.ca. Click here for the full story.

Mattamy Homes and QuadReal Property Group have scheduled a fall launch for Phase 1 of their condo project The Clove, part of the $6-billion redevelopment of Cloverdale Mall in Etobicoke.

The 33-storey tower to be sited on a standalone location on a 2.3-acre gateway site at 2 & 10 The East Mall Crescent will be paired with a nine-storey midrise, totalling over 600 condo units, according to an announcement that includes final design drawings.

Both buildings play a role in the redevelopment of Cloverdale Mall, a 32-acre shopping centre, into a master-planned community. The overall plan is to add more than 5,000 condo and purpose-built rental units, two public parks and new streets at the property.

The renderings show the plan for a new street network that connects community amenities including retail, residential and green spaces.

“This first building is the singular opportunity to get in on the ground-floor as this 32-acre master-planned community takes shape over the next decade,” Niall Haggart, president of Mattamy Homes’ Greater Toronto Area urban division, said in a release.

While there was major office leasing activity in downtown Toronto in Q1 of this year, that momentum evaporated during the next three months according to Newmark’s new 2Q ’24 Downtown Toronto Office Market Overview.

Of downtown Toronto’s 85 million square feet of office space, 14.6 per cent of it was vacant the report states. That rate is a 24-year high.

The ongoing heightened vacancy is largely the result of deliveries of new supply, the office real estate cycle and structural changes in how tenants use office space due to technology. COVID-19 magnified all of these factors, according to the report from the commercial real estate advisor and service provider.

The year got off to an atypically strong start (approximately 1.4 million square feet of leasing) thanks to more than 622,000 square feet of pre-leasing in Phase 2 of CIBC Square.

More than half of that space involved a 327,000-square-foot lease signed by CPP Investments, which will move from its current headquarters at 1 Queen St. E. While that represents a major lease transaction, it also leaves open the question of what will happen at the class-A 1 Queen when CPP vacates the building, which it currently owns.

Q2, however, was the weakest in the past decade in total square footage leased downtown, at approximately 200,000 square feet, which the report’s authors say doesn’t bode well for absorption in the back half of the year.

“Absorption is the final result of many variables and as a result we can see varying amounts of absorption on a quarterly basis. One quarter doesn’t necessarily define a market and in this case, we saw significant absorption in the first quarter and less so in the second quarter based on the timing of when tenants occupied space,” Newmark director and head of Canada research Andrew Petrozzi wrote in an e-mail interview with RENX.

“We would need to see results for multiple quarters before a trend could be identified.”

Downtown south and financial core performed best

The market does continue to see strengths and weaknesses based on property class and location, he said.

“Trophy and class-A properties in downtown south and the financial core saw strong performance in the first half of 2024, while downtown north suddenly experienced more challenges than in previous years.”

“Downtown west continues to show signs of improvement after a couple of years of rising vacancy and availability.”

Landlord incentives for class-B space remain in play as the delta between class-A and -B rents continues to widen due to rental rate erosion in less desirable class-B buildings and upward pressure on class-A rents due to tenant demand. The class-A vacancy rate has stabilized at around 13 per cent.

“Class-A office space is seeing strong tenant demand in many submarkets, capturing the majority of the core’s leasing activity and enjoying the tightest vacancy rates, particularly in downtown south at 7.2 per cent and in the financial core at 12.4 per cent,” Petrozzi wrote.

“Rents for class-A space are holding steady, and in some cases even increasing, while we are seeing rents come off some in class-B space. Most built-out spaces, model suites and full-floor opportunities, particularly in well-located class-A premises in downtown south and the financial core, have been leased, which has tenants considering space in warm shell or bare shell conditions.”

The class-B vacancy rate rose to 17.9 per cent, not far behind the 18.3 per cent class-C rate.

Sublease availability had declined from 5.6 per cent in the first quarter of 2023 before stabilizing in the first half of 2024 at around 4.5 per cent.

“Tenants seeking flexibility as well as shorter term and reduced rental rates started returning to the market,” Petrozzi wrote about the sublet market. “If the sublease space was built out and ready for occupancy with no delay or additional costs, it was all the more attractive to tenants.”

More office developments planned

The current office development cycle for space that started arriving in 2020 and runs through 2025 is set to deliver more than nine million square feet, with almost 2.6 million square feet still under construction.

Despite today’s adverse market conditions, more than 4.5 million square feet of office space remains proposed in buildings larger than 250,000 square feet.

This includes:

• 890,000 square feet at 1 Yonge St.;
• 1.4 million square feet at 30 Bay St.;
• 450,000 square feet at 1 Front St. W.;
• 700,000 square feet at 200 Front St. E.;
• 270,000 square feet at 25 Liberty St.;
• 270,000 square feet at 251 Queens Quay E.; and
• 670,000 square feet at 212-220 King St. W.

“I’m unaware of any major office developments downtown that have been cancelled outright,” Petrozzi noted. “However, some developments may shift to alternative uses if the zoning permits and the building can accommodate those changes.”

Office building transactions have plummeted

Downtown core and periphery office sales came to a virtual standstill in the first half of 2024, totalling just $80.4 million with the $65 million sale of 70 York Street and the disposition of the iconic flatiron-shaped Gooderham Building at 49 Wellington St. E. for $15.4 million.

“Potential office building buyers were cautious in the first half of the year for a few reasons, including a lack of sale comparables in Toronto and across Canada, as well as outstanding macro-economic issues around interest rates and cost of capital,” Petrozzi observed. “Recall that interest rate cuts didn’t start until June, and these numbers from the first half reflect a more conservative financial outlook during a period of uncertainty about when the Bank of Canada would act.

“While workers are returning to the office in greater numbers each passing month, Toronto has been slower to recover than most other Canadian cities, which may also have a dampening effect on investors’ enthusiasm to acquire these assets at this current juncture in Toronto. That can and will change.”

Office sales totalled $1.6 billion in 2023, which represented a 21.5 per cent decline from 2022.

Minimal office condominium sales

Condominium office sales peaked between 2020 and 2022 in total dollar volume as construction was completed and transactions closed. The pre-sales of these units likely occurred during the period of record low office vacancy recorded in downtown Toronto between 2017 and early 2020.

A lack of space for lease combined with a low cost of capital helped sales of office condos as investments and a hedge against rising office rental rates typical of that period.

“Office condos have historically not been a popular form of ownership in Toronto and represent a minuscule portion of the market,” Petrozzi wrote. “While downtown leasing rates stabilize or even decline, and vacancy remains elevated, the demand for office condos generated by a tight office leasing market has diminished.

“Although declining interest rates typically boost buyer interest in office condos due to lower financing costs, the current supply and smaller developments will likely meet existing demand for now.”

Source Renx.ca. Click here for the full story.

Canadian retail real estate rents have continued to rise across all format types and, with little significant new supply on the way to meet demand, that trend is expected to continue.

“We are not adding enough retail space for the population growth that Canada is experiencing,” CBRE senior vice-president Alex Edmison, who co-authored his company’s newly released H1 2024 Retail Rent Survey, told RENX.

“One reason is some retail assets are being reimagined as mixed-use developments, so there’s a certain amount of retail inventory coming out of the system.”

It’s anticipated that quality locations will continue to be leased quickly as vacancy declines further. Retailers are being strategic and seeking sites that either improve their exposure or increase their market share, including a focus on areas with higher levels of population density.

Retail developments

It’s difficult to underwrite new retail construction as costs have been rising during a time when, until two recent cuts, interest rates were also rising and were much higher than earlier in this decade.

“Rents really need to appreciate quite significantly to justify new construction in this climate,” Edmison said. “We’re not seeing development at scale and a lot of the development that’s happening is stuff that was financed or put in the pipeline a long time ago.”

One example of this is at Royalmount, a mixed-use community in midtown Montreal that is Quebec’s largest private development. It will be home to more than 170 stores, including 60 restaurants. The first phase of the Carbonleo project is slated to open in September and half of Royalmount’s retail concepts have never previously been seen in the province.

While new supply has been limited recently in Winnipeg, mixed-use developments with retail components under construction include Shindico’s Align Winnipeg, Private Pension Partners’ The Zu and Whiteland’s Polaris Place. Qualico Properties has also begun development of the 10,000-square-foot Sage Creek Village East.

Edmonton-based Opulence Management Corp has proposed to develop Fort Saskatchewan Common, a new plaza on a 20-acre greenfield site 25 kilometres northeast of Edmonton that will include retail, office and restaurant spaces built in still unspecified phases.

“Do I anticipate much more development?” Edmison surmised. “Over time for sure, but tomorrow, no. Fundamentals just aren’t there and no-one wants to risk it. We need to see interest rates stabilize and construction costs stabilize.

“There’s a need to be comfortable with where rents are because it takes a long time to build these projects and the order of magnitude of capital needed these days is very significant.”

Luxury and discount retailers both doing well

There’s a bifurcation of tenants at opposing ends of the value spectrum, with luxury and discount doing extremely well and rising above the vanishing middle segment.

The luxury and apparel sectors have been active across high street and enclosed mall spaces and first-to-market brands continue to push into top nodes.

Meanwhile, discount grocers — including No Frills, FreshCo and Food Basics — are among the most active brands.

“Changing consumer and behavioural spending patterns could be in response to inflation,” Edmison said.

“Never in my career, which has been about 17 years doing urban retail, have I been doing so much business at the discount end of the spectrum,” he added, noting that a previous bias against discount retailers locating in mixed-use properties seems to be disappearing.

The non-traditional service/medical sector has also seen an explosion in market penetration in recent years due to government funding for private magnetic resonance imaging and computed tomography facilities as well as the incursion of international medical and pharmaceutical companies.

Varied markets are performing well

Edmison’s primary focus is on downtown Toronto retail, but he’s also seen activity growth in neighbourhoods just on the periphery of the core, including The Distillery Historic District, Canary Landing and, most recently, at The Well at Spadina Avenue and Front Street West.

Despite fewer people occupying Financial District offices with the rise in hybrid work from home patterns, Edmison has observed restaurants in the area are doing very well — even on weekends.

“As populations grow and things intensify, that is funnelling more and more business in the core areas of Toronto,” said Edmison. “We’re seeing great leasing momentum, low vacancy and healthy fundamentals.”

Edmison has been pleasantly surprised by the strength of the Halifax retail market, where Rolex is opening a store and Arc’teryx has established a flagship location.

Cities in Alberta and Saskatchewan have also been performing well, Edmison added.

Source Renx.ca. Click here for the full story.

Prologis has become a major player since reaching north from its U.S. base and entering the Greater Toronto Area (GTA) industrial real estate market 20 years ago. Its growth in Canada continues, with millions of square feet in its development pipeline.

“We’ve always been growing via development and haven’t been one that just stood in line and lined up to buy existing buildings,” Prologis vice-president and country manager Bill Bolender told RENX.

Prologis has an approximately 11-million-square-foot portfolio in the GTA. There’s another six million square feet in its development pipeline, with about 2.5 million of that now under construction across six buildings.

Internationally, the San Francisco-based firm owns or has investments in logistics properties and development projects expected to total approximately 1.2 billion square feet, spread across 19 countries. It leases facilities to approximately 6,700 global customers.

GTA properties under development

That number will be growing soon as more GTA developments reach completion.

Ground was recently broken on Prologis’ first project in Halton Hills at 8111-8119 Trafalgar Rd., on the north side of Steeles Avenue across the street from the Toronto Premium Outlets mall. Three buildings totalling around 1.3 million square feet are planned.

The first two speculative facilities are underway and expected to be completed in early 2025:

• one at 474,945 square feet with a 42-foot clear height, two grade-level doors and 66 dock-high doors;
• and the other at 496,192 square feet with a 42-foot clear height, two grade-level doors and 68 dock-high doors.

Prologis is speculatively developing two identical 158,610-square-foot distribution centres at 450 Evans Ave., just south of the Gardiner Expressway, in Etobicoke. They’re scheduled to be completed this year and will offer 36-foot clear heights, two grade-level doors, 20 dock-high doors and 2,475 square feet of office space.

Prologis broke ground 14 months ago on a distribution centre of just under a million square feet for Lululemon at 5525 Countryside Dr. near Highway 50 in Brampton that’s scheduled for completion this fall. The facility is expected to employ 1,500 people.

Prologis’ first mass timber structure

Another facility in that same Brampton business park, which will total three buildings, will be an approximately 250,000-square-foot mass timber structure.

“It’s the first of its kind in North America from the perspective of being a large-scale speculative industrial building for lease, and the first in the Prologis network,” Bolender said. “Given that everybody’s focused now on ESG (environmental, social and governance) and carbon reduction — us as well — we’re pretty excited about how it’s going to do in the market.”

The first timber column went up on July 17 and completion is expected early in 2025.

Also just north of Toronto, Prologis acquired 198 acres of land at 12519 and 12713 Humber Station Rd. in Caledon from Solmar Development Corp. for almost $500 million two years ago.

The property offers easy access to Hwy. 50 and the northern terminus of Hwy. 427. Hwy. 400 is a few kilometres to the east and the route for the planned Hwy. 413 is beside the site.

It had been earmarked as future industrial land and is now going through the entitlement process. Site plan applications have been submitted and a public meeting has been held.

“That’s seeing lots of interest, specifically from large million-square-foot-plus users,” Bolender noted. “We had a good idea of what size of blocks we were going to be able to have in that park and there’s a very limited number of sites out there that can deliver those sizes of buildings.”

Bolender is hopeful that mass grading of the site can begin within 12 months. He envisions it including four to six buildings ranging in size from a low of 250,000 square feet to more than a million square feet.

Still bullish on GTA industrial market

Bolender is working with Toronto-based vice-president and investment officer Bill Bates to uncover more GTA land acquisition opportunities.

“We love to aggregate parks and buildings in an area,” Bolender said. “For example in Milton, we have eight buildings ranging from 100,000 square feet up to half-a-million square feet.

“What it allows us to do is move customers around when their businesses grow or when they contract, or when they come and go from the market. It helps you keep your customers.”

The GTA’s growing population should mean continued increases in demand for products that go through industrial and logistics facilities. Thus, Bolender has faith in the market despite the increase in vacancy rates and decrease in rents since early 2023 due to a correction of what was an overheated market.

“Some of our competitors found it tougher to get financing and tougher to move speculative projects forward, so it’s been good for us from that perspective,” Bolender noted. “We’re confident in the Toronto market and it’s one we’re actively trying to grow profitably.”

Examining other cities

Prologis is looking for acquisition opportunities in Montreal and Vancouver to expand its Canadian footprint outside the GTA.

“We’ve always liked markets that are land-constrained and tough to get into, and definitely both of those are,” Bolender said. “The brokerages know that we’re looking for the right opportunity. So whether that’s a portfolio or a company or some large development sites, we’re just looking for the right one.”

Properties with existing buildings would likely need to have additional development potential to interest Prologis, Bolender added.

Source Renx.ca. Click here for the full story.