New LaSalle Fund Buys GTA Industrial Portfolio, apt. Building

LaSalle Investment Management’s fifth Canadian value-add real estate fund, LaSalle BVK Canada Advantage, has acquired an industrial portfolio and a multiresidential property in the Greater Toronto Area (GTA).

The acquisitions are the first capital deployments for BVK Advantage after it closed in December 2021 with a capital raise of $306 million. The fund secured commitments from institutional European capital sources and includes a co-investment vehicle.

“Well-located urban rental housing and last-mile, or small- and mid-bay industrial are our two highest-conviction, research-driven themes,” LaSalle Canada chief executive officer John McKinlay told RENX. “We’re not limited to that, but that’s certainly where we think that the best risk-adjusted returns for this fund series are at this point in time.”

With these initial acquisitions, McKinlay said BVK Advantage has a little less than half of its $306 million still to deploy.

GTA industrial portfolio

The industrial portfolio was acquired from an institutional owner and consists of eight small- and mid-bay properties totalling nearly 400,000 square feet in Mississauga and Brampton. Financial details were not disclosed.

It’s fully leased, with a weighted average lease term of just over two-and-a-half years, and has significant upside due to below-market in-place rents.

McKinlay said there’s not a lot of small- and mid-bay industrial product being built, which is one of the reasons the portfolio appealed to LaSalle Canada. Its unit sizes are in the 5,000- to 30,000-square-foot range, according to McKinlay.

While no major capital expenditures will be required for the buildings, McKinlay said LaSalle Canada will look at ways to make them more energy-efficient.

The GTA industrial market

The GTA is one of North America’s largest industrial markets at 800 million square feet, but it faces land constraints due to the environmentally protected Greenbelt that surrounds a significant portion of the region.

“You’re seeing groups buying obsolete office to knock down and build large logistics facilities, because it’s hard to get contiguous land,” McKinlay said, noting the embedded land accounts for 80 per cent of the value of the newly acquired eight-property portfolio.

The GTA industrial market has seen rents grow at a three-year compound annual growth rate of 20 per cent amid a surge in demand, driven largely by e-commerce.

“There might be a pause in terms of rents in the next little while, but I think the fundamentals and the kind of macro thesis is still very much there to support these types of investments for us,” McKinlay explained.

75 Eastdale apartment acquisition

The multiresidential property at 75 Eastdale Ave. includes a 15-storey, 253-unit apartment building along with 16 two-storey townhomes in the Danforth Village area in Toronto’s east end. It’s 96 per cent leased with a unit mix that includes studios, one- to four-bedroom apartments and townhomes.

The property was acquired from CAPREIT for $90.1 million.

LaSalle Canada will undertake select unit and common area renovations for 75 Eastdale in an effort to make it more attractive to renters and increase its occupancy rate.

There’s limited apartment supply In 75 Eastdale’s immediate area, which offers close proximity to public transit, retail, restaurants, Taylor Creek Park and employment centres.

“It has all the fundamentals that we want in terms of location, amenities and transit, and we targeted it as a gentrifying market that will continue to grow,” McKinlay said.

The Toronto apartment market

The Toronto market is projected to have 10 million people by 2046, according to LaSalle Research & Strategy. It has averaged under 1.5 per cent apartment vacancy for the past 10 years as demand has outpaced supply.

Toronto’s large amount of quality immigrants, along with high house and condominium prices, will continue to make purpose-built rental apartments in the city an attractive investment for LaSalle Canada.

“Toronto is a major global city which has one of the lowest per-capita rental housing numbers out there,” McKinlay observed.

LaSalle Canada’s investment pipeline

Chicago-headquartered LaSalle Investment Management managed approximately $82 billion of assets in private and public real estate property and debt investments as of Q2 2022.

Its clients include public and private pension funds, insurance companies, governments, corporations, endowments and individuals from around the world.

LaSalle Canada, which has offices in Toronto and Vancouver, has executed more than $7 billion in real estate transactions since 2000.

Its investment pipeline is largely focused on Toronto, Montreal and Vancouver and properties that provide rent escalations.

“We will always be looking for the best risk-adjusted returns,” McKinlay said. “We’re looking for value and we’ve always distinguished ourselves on our ability to be good with deal selection.”

Source Real Estate News EXchange. Click here to read a full story

SHEIN, Amazon, and the Strength of Canada’s Warehouse Market

Fast fashion giant SHEIN announced earlier this month that it had opened a new 170,000-sq.-ft warehouse and office space in Markham, Ontario, marking its first-ever distribution facility in Canada. The Chinese retailer’s latest investment is a sign of the times for Canada’s commercial real estate market, which has seen steady interest and growing prices for warehouse properties.

E-commerce sales surged during the pandemic, allowing brands like SHEIN — a favourite among Gen Z — to grow rapidly. Although that rapid e-commerce growth has since tapered off, retail sales in general are still on the rise, according to the latest available data from Statistics Canada. Retail sales totalled $61.8B in August if this year, of which $3.5B was e-commerce.

The new SHEIN facility plans to capitalize on growing demand in Canada, with the new distribution centre allowing them to offer better service for Canadian customers.

“Our new facility will help us cut shipping times for Canadian customers and reduce the number of packages in the international shipping stream — delivering on two of our key business priorities,” SHEIN Canada General Manager Vito Zhong said in a press release.

Amazon has similarly expanded its Canadian footprint, announcing the construction of several new warehouses across the country. And in December of last year, Amazon announced the lease of a 100,000-sq.-ft building in Ottawa’s Hawthorne Industrial Park that will serve as its delivery station facility for the region. Purolator has also gotten in on the new warehouse action too, announcing plans to open two new facilities, including a 585,000-sq.-ft, state-of-the-art sorting facility in Toronto to allow for processing higher volumes of packages.

Despite dramatic fluctuations seen in the residential market, demand for warehouse space has remained steady, particularly in the Greater Toronto Area (GTA). In fact, Thomas Cattana, Vice President at Colliers, notes that vacancy rates are the lowest they’ve been in recent memory.

“If you look back 10 years ago, the availability rate would have been a number around 5%, and today that availability rate as of Q3 2022 is less than 1% — it’s 0.7%,” Cattana told STOREYS.

When a warehouse facility does come up for lease, particularly if it’s a good size and is close to transit routes, Cattana says you have to act quickly, as there are typically multiple groups that would be eyeing it.

Colliers was tasked with finding the GTA warehouse space for SHEIN, which in today’s market was not an easy feat. Wanting a facility that was move-in ready and around 170,000 sq. ft, there were only a few options available — one of which was the 10 Canfield Drive property in Markham that the fashion retailer ended up leasing.

“When we were working over the summer, we really only had a few options at hand,” Cattana said, “This option works excellently for what they require, but if you need a near-term availability, you’re not looking at an option list that is in the double digits.”

With higher demand inevitably comes higher prices. In the GTA, the average lease price for both commercial and industrial space was up in Q2, according to Toronto Regional Real Estate Board data. Commercial leases sat at $26.58 per sq. ft in Q2 2022, up from $20.07 one year prior. Industrial leases averaged $13.33 in Q2, up from $11.08 during the same time last year.

Although retail growth since the onset of the pandemic certainly allowed more retailers to expand their operations, increasing demand, the drying up of available warehouse spaces began long before that.

“The Greater Toronto Area industrial market has been, over the last 10 years or longer, steadily declining in availability,” Cattana said. “We typically build somewhere between 10 and 12M sq. ft per year, and every year, the market is under supplying the demand for warehouses.”

Cattana says he’s seen some creative new trends emerge that can add more warehouse space more quickly, like the construction of multi-storey warehouses.

“A site that would have typically had a 45% site coverage might have a building that is exceeding that, so that can be a way that you add more square footage to the market,” Cattana said. “There’s one that’s being developed in Vancouver right now, and there’s one that is planned to be under construction within the Greater Toronto Area.”

Warehouses are also getting taller, which allows companies to fit more product into the space, improving their cubic efficiency, Cattana noted, saying “that would ideally relieve a bit of the demand.” He points to an example of a new 40-ft-tall warehouse being built on Sheppard Avenue that replaced an older warehouse that was roughly one-third of the height.

“Now it’s going to be a brand new building that is going to meet the needs of the today’s occupier,” Cattana said.

Source Storeys. Click here to read a full story

Yonge Street is Alive and Well Again: Foot Traffic Surges Past 2019 Levels

Canada’s longest street is back in action.

On Thanksgiving weekend, more than half a million people walked along downtown Yonge Street — a figure that’s higher than during the same weekend in 2019, before the pandemic would turn the city into a ghost town.

This is according to the Downtown Yonge Business Improvement Area (DYBIA), which has a pedestrian counting system that it monitors and regularly posts statistics on their website.

“I don’t think I was surprised is the right word; I think I’m pleased,” Pauline Larsen, interim Executive Director of the DYBIA, told STOREYS. “We are beginning to see that recovery is not linear. We didn’t know what was going to happen at the beginning of the year; it was still pretty quiet at the beginning. It wasn’t until spring when we really started to see an uptick.”

Larsen references the intro of new retailers into the area this year: IKEA opened its first urban format store in May, Congee Queen found new downtown real estate, and Uncle Tetsu also moved into the neighbourhood.

While the streets around downtown Yonge are alive and well again, we are not at pre-pandemic levels; Thanksgiving weekend was a bit of an anomaly.

“The neighbourhood foot counts are still tracking 10-15% below 2015,” says Larsen. “It was significantly better than 2020 or 2021, but we weren’t at pre-pandemic levels. So, when we got the Thanksgiving numbers back, we were really excited because we saw that the numbers were actually higher than they were for the same period in 2019.”

While weekend tourists inevitably played a role in this, Larsen says that the foot traffic surge can be attributed to a variety of factors as well. For example, students have returned to Toronto Metropolitan University (formerly Ryerson University), workers are back in offices, the neighbourhood has a significant residential population, and conferences — like the recent Green Building Festival held at the Marriott CF Eaton Centre — have returned to neighbouring hotels.

“All these things combined have made a significant difference,” says Larsen. “We have seen through the pandemic that a lot of the residents still shop in the area. In the downtown core, Toronto’s offices are at 35% of their occupancy rate. It’s not impressive, but it’s way better than the 10 to 12% figures we saw before.”

In terms of retail, the Eaton Centre — one of the neighbourhood’s crown jewels — lost fewer businesses than street front retailers. “Several times a year, we have an audit of our retail vacancies and occupancies to try to get a handle on where to focus support, manage retail recruitment, etc.,” says Larsen. “Based on the latest figures from the summer, there was a 14% retail vacancy rate, which isn’t unexpected after a two and a half year pandemic. The street retail vacancy rate was 19%, compared to 9% in malls, so we’ve seen a greater hit from the pandemic on street level retailers. But 14% overall is better than they would expect, so we’re grateful.”

Larsen says she hopes the trend continues into the holidays. “We’re seeing a lot of people embracing in-person events,” she says. “And the Barbara Ann Scott skating trail is opening for the season on November 26. Our lesson is that recovery isn’t linear; it’s going to go in fits and starts. But we’re happy to see upticks and think they’re becoming more frequent. The holiday season will be proof of the pudding.”

Source Storeys. Click here to read a full story

New Downtown Toronto Building Razes The Roof to Add New Floors

The architects and builders redeveloping Cambridge Suites Hotel at the edge of Toronto’s financial district say their plan is going to take construction techniques in the city to a whole new level. It looks like they’re not exaggerating.

The development proposal for the 21-storey property on Richmond Street East near the city’s soaring bank towers starts with the removal of the 1990 postmodern building’s peaked roof.

In its place will be an additional 50 storeys, bringing the new project to a height of 757 feet (230.85 metres), head-to-head with neighbours such as the Toronto-Dominion Centre (731 feet).

It’s a complicated project that will require a 10-metre-high bridge structure to be built atop the existing hotel where the roof is removed. The bridge will help bear the weight of the new tower, explains Len Abelman, principal at Toronto’s WZMH Architects, the firm designing the redevelopment for the property’s owner, Centennial Hotels Ltd.

“It’s not a common technique, it’s challenging. We worked with a firm called RJC Engineers to do simulations of the massing and loading of weight and the lateral forces the building will face, to make sure it will work,” Mr. Abelman says.

“Other projects in Toronto have added floors before, but it’s usually done with a big exoskeleton that goes over the entire building. This one uses technology that transfers some of the weight to the columns and the floors of the existing structure below,” he says.

The site’s hotel, which currently offers 231 suites for business travellers, will be turned into 565 residential units with retail and commercial businesses at ground level; 42 per cent of the units will be two- or three-bedroom units to meet the city’s requirement for more family-sized downtown accommodation.

In September, the developers commissioned Bousfields Inc. to prepare a planning rationale document as they are seeking zoning and Official Plan amendments from the City of Toronto.

Bousfields explains that the current hotel is within an area of downtown Toronto that the city has designated as a “strategic growth area … for accommodating intensification and higher-density mixed uses in a more compact-built form.”

Return to office

The long-term idea is to redevelop downtown properties such as Cambridge Suites to reflect changing patterns in the way people live and work. As the pandemic ebbs and flows, people are slowly drifting back to the office, but it’s not quite a stampede.

As of mid-August, the percentage of people going to offices in Toronto was still 30 per cent of pre-pandemic levels, according to the Strategic Regional Research Alliance (SRRA), an independent research group that keeps tabs on changing work patterns.

“Putting more housing in the financial core is a real act of city-building. It will make a difference to the people who live and work there,” says Alan Vihant, president of Elan DEV Group and a spokesperson for the developers’ consortium.

“And we think there’s a way to do it by repurposing the existing building and augmenting it.”

The city’s own growth plan calls for more urban neighbourhoods that would allow for people to live near their work and get around without cars. The Cambridge Suites property is within 800 metres of six Toronto Transit subway stations, including Yonge/Queen and Union Station, which will eventually become transfer hubs for new lines.

“People are starting to come back to offices at least for three or four days a week. But they don’t want long commutes to get there, ” Mr. Vihant says.

Like virtually all new commercial construction nowadays, the new project aspires to meet better environmental and sustainability standards than older buildings. According to Natural Resources Canada, 13 per cent of Canada’s greenhouse gas emissions come from the building sector, the third- largest source of emissions.

Environmental benefits

The new tower will be more thermally efficient than the existing building and will feature bird-friendly glass and 41 square metres of green roof, says Michael McClelland, founding principal of ERA Architects, also working on the project. The project will have only 21 spaces for cars, compared with more than 570 spaces for bicycle parking.

However, Mr. McClelland cautions that the building won’t officially be a fully state-of-the-art green building because it’s incorporating the existing hotel structure into the design.

This construction technique brings other environmental benefits though; using the existing building as a weight-bearing base rather than tearing it down helps address climate change by retaining embodied carbon in the building material.

This reduces the emissions that would result from tearing down the existing structure and replacing it with a new building.

“There is nothing in the city’s current guidelines about retaining embedded carbon yet, but Toronto and other cities are catching up to this idea as they develop new sustainability rules,” Mr. McClelland says.

His firm was also asked to look at any heritage considerations that might arise from reimagining the site, he adds. But the building is only 42 years old so it is not particularly iconic or emblematic, he says.

It will likely take about 18 months to complete the zoning process with the city and up to six years to complete the project, Mr. Vihant says. But WZMH’s Mr. Abelman says the redevelopment is already embracing the future.

“This weight-bearing technology we’re using is the technology of the 2020s – I’m not sure it would have been possible even a few years ago,” he says.

Source The Globe and Mail. Click here to read a full story

Converting Office Buildings to Hybrid Spaces, Multiuse Facilities, Key to Downtown Planning

With 85 per cent of employees now expecting a hybrid work experience, the pressure is on for employers to deliver. Businesses have had to rethink their entire value proposition to both recruit and retain, says Sheila Botting, president of Americas professional services at Avison Young.

Ms. Botting spoke at a recent webinar hosted by the Canadian Urban Institute (CUI) on trends and opportunities for revitalizing Canada’s downtown centres, including strategies to transform vacant commercial and office spaces. Attracting more area traffic, including workers, is an essential part of the solution, she said.

“The second you offer a high-performance or exciting workplace, whether it’s the physical building, the trophy assets, downtown location or great corporate culture, suddenly you can attract more people back to the office,” she said. “People want that experience, and so traditional environments need to be modified – for example, instead of sterile marble lobbies, we’re seeing more hotel-type experiences with coffee bars and restaurants.

If I didn’t have a flex work policy at my company today, chances are I would resign and go to another company that would allow me to work from home two or three days a week.

— Sheila Botting, president of Americas Professional Services at Avison Young

“If I didn’t have a flex work policy at my company today, chances are I would resign and go to another company that would allow me to work from home two or three days a week.”

Jamieson Jackson, managing director of the office practice group for the GTA, at Colliers, says many tenants are still renting the same amount of office space as before, but using it in different ways.

“It’s now more about collaboration space and less about cubicles – more meeting rooms and ways for teams to interact. We’re also seeing an evolution of what companies are saying needs to be done face-to-face, versus remotely,” he says.

“Hybrid work wasn’t born out of the pandemic,” he adds. “It was just accelerated. As office attendance is generally higher in the middle of the week, compared to Mondays or Fridays, we’ll need new ways to measure what full office occupancy looks like.”

Companies are exploring a variety of amenities to bring employees back, including major game-changers like onsite daycare. “There’s also a flight to quality – we see vacancy rates in Triple A buildings in Toronto at 4.6 per cent right now versus more than double that in B class offices at 11 per cent,” Mr. Jackson says.

Rebuilding downtowns into more complete neighbourhoods where residents can live, work and play is a complex endeavour that can serve as not just a major recruitment and retention tool but also a catalyst for profound societal change.

Earlier this year, Hudson’s Bay Co. gifted its flagship store in downtown Winnipeg to the Southern Chiefs’ Organization (SCO), in what has been praised as the largest act of corporate reconciliation in Canada.

The six-storey, 60,000-square-metre building will be restored and transformed into a multiuse property that will include a child-care centre, art gallery and museum, multiple restaurants, and a health centre offering western and traditional medicine.

In addition to nearly 300 affordable housing units, it will also have SCO offices as well as a place of reflection to honour victims of residential schools.

“By providing social and economic opportunities, the space is really going to help us be a strong part of the downtown,” said Jennifer Moore Rattray, chief operating officer of SCO, who was also a panelist at the CUI webinar.

“We hope it begins to change the trajectory of our people in the Winnipeg downtown,” she said. “By providing a main-floor public space for everybody to come together, to learn and grow, and help repair and heal our city – which has been called the most racist city in Canada – we can be a real force for good and for change.”

The six-storey, 60,000-square-metre building will be restored and transformed into a multiuse property that will include a child-care centre, art gallery and museum, multiple restaurants and a health centre offering western and traditional medicine.

Colliers Snapshot for Q3

According to Colliers’ Q3 National Market snapshot published this fall, many business leaders in the GTA have doubled down on return-to-office work initiatives. Some major tenants who previously embraced more flexible hybrid policies are now mandating at least two or three days a week in the office, citing culture and productivity reasons. At the beginning of September, downtown office occupancy was just under 30 per cent.

Overall office vacancy decreased in half of Colliers’ tracked markets. Suburban vacancy rates are almost universally lower than downtown because of appealing features such as lower rents, free parking and shorter commutes.

Close to 70 per cent of all new office construction is still downtown, with 94 per cent of construction in downtown in Toronto. Vancouver tends to be more evenly split, while the suburbs dominate in Calgary and smaller markets.

Conversions in Calgary’s downtown core continue to focus on office-to-multifamily, leveraging funding from the City’s Downtown Calgary Development Incentive Plan. Roughly 750,000 square feet of office space has either been confirmed or is already under construction.

The industrial market in Calgary kept up the momentum throughout the summer, with decreasing vacancy rates driving up net rental rates. Because of the lack of available market inventory, landlords are less willing to fund improvements or offer free rent to the extent they have in the past.

Mr. Jackson says most of the companies Colliers talked to believe the office is an “important portion of their tool kit.”

“Ultimately, people invest in office space because it helps them build their business.”

Source The Globe and Mail. Click here to read a full story

CanFirst Acquires $222.6M GTA Industrial Portfolio

The CanFirst Industrial Realty Fund VII LP has acquired a 13-property, 710,389-square-foot portfolio in Vaughan, Ont. from IG Investment Management for $222.6 million.

“We’re excited to be able to acquire assets in this node in Vaughan,” CanFirst Capital Management executive vice-president Mark Braun told RENX. “It’s always been a challenge to find properties in the area, certainly at a price point that’s competitive or allows us to transact.”
The portfolio encompasses 38.9 acres of land. The deal was brokered by CBRE and attracted interest from several potential purchasers.

The transaction, which closed Monday, represents a price of $313 per square foot.

All of the properties are located within about a kilometre of each other in Vaughan, and CanFirst is interested in acquiring more such locations in the city of approximately 340,000 people located directly north of Toronto.
mall and mid-bay properties

“It’s a mix of small-bay and mid-bay industrial tenancies,” said Braun of the portfolio.

The smaller units are in the 1,000- to 5,000-square-foot range while the largest is just over 50,000 square feet. The portfolio is 99.8 per cent leased, with just one small vacancy, and has an average remaining lease term of 2.5 years.

Braun said existing rents are about 50 per cent of the market rate, so the deal provides a good opportunity for capital growth when leases expire. There’s also potential to convert some units to industrial condominiums and sell them, Braun added.

The properties have been well-maintained and are in good condition and won’t require any major capital expenditures, according to Braun, who said there are no intensification opportunities within the portfolio.

CanFirst has been an active industrial buyer in recent months.

In October it partnered with Colonnade BridgePort to acquire a 50-acre site in the southwest sector of Ottawa. The partners plan to construct up to 900,000 square feet of new space on the land starting in 2024.
That site was acquired on behalf of its CanFirst Industrial Development Fund.

The last major acquisition for the Industrial Realty Fund VII took place in 2021, when it purchased the so-called Dozyn Dezyn portfolio, comprising 11 buildings in the communities of Surrey and Abbotsford, B.C. The small-bay and mid-bay buildings are a combined 412,897 square feet and were fully leased.

The purchase price was $104.5 million.

CanFirst Capital Management

Toronto-headquartered CanFirst was founded in 2002. It co-invests with institutional and private high-net-worth investors in industrial and office properties that have added potential to exploit for growth in major and select secondary Canadian markets.

CanFirst has raised $1 billion in equity and completed more than 16 million square feet of real estate transactions.

CanFirst manages growth-oriented and income-oriented funds. The $250.5-million CanFirst Industrial Realty Fund VII LP closed in July 2020 and is now fully allocated after this latest transaction.

Source Real Estate News EXchange. Click here to read a full story

Supreme Court Limits Governments’ Ability To “Constructively Take” Land

Supreme Court guidance is good news for developers

In a long-awaited decision, the Supreme Court of Canada has ruled on de facto expropriation of land.

In Annapolis Group Inc. v Halifax Regional Municipality, the Supreme Court provided guidance for situations in which the government essentially takes away land rights from property owners without formally expropriating the lands.

Although there is still a ways to go before the law in this area is settled, this decision is definitely a positive decision for developers’ and landowners’ rights in general.

Background and facts

Annapolis Group Inc. is a Halifax-based land developer which has been accumulating vacant land since the 1950s.

It had eventually amassed nearly 1,000 acres with the intention of developing it.

The Halifax Regional Municipality set out a new planning strategy in 2006 which identified part of the lands for possible use for a park in the future and denoted them as “Urban Settlement” and “Urban Reserve”, meaning the lands may be developed by the municipality within, or after a 25-year period.

Also, as part of the strategy, Annapolis was prohibited from developing the lands before the municipality adopted a “secondary planning process”.

Annapolis began seeking approvals to start developing the lands in 2007.  In response, the municipality passed a resolution stating that it refused to initiate the secondary planning process “at that time”.

In the years that followed, the municipality encouraged the public to use the lands for outdoor activities such as hiking and camping.

Ten years later, Annapolis commenced legal proceedings against the municipality, seeking over $120 million in damages.

Annapolis alleged the municipality had effectively turned parts of the lands into a public park by encouraging members of the public to use them for outdoor purposes and therefore claimed damages based on de facto expropriation, unjust enrichment and abuse of/misfeasance in public office.

The municipality brought a summary judgment motion to dismiss Annapolis’ de facto expropriation claim, which was initially dismissed.

The Nova Scotia Court of Appeal later sided with the municipality and summarily dismissed Annapolis’ claim without allowing it to go to trial.

The court ruled the municipality did not commit de facto expropriation of the lands because no land was actually taken from Annapolis and the municipality therefore did not acquire a “beneficial interest” in the Lands.

It was also ruled that encouraging the public to use the lands and failing to adopt a development plan did not mean the lands were expropriated on a de facto basis.

The new test for “constructive taking” of land

The Supreme Court of Canada, however, saw things differently.  The Supreme Court referred to de facto expropriation as “constructive taking”, as it applies to situations where a land owner alleges the state takes its land without formally expropriating it.

In other words, the state does not exercise its statutory authority to acquire an interest in the land and compensate the owner, but it does take steps to claim the land by other means.

In its decision, the Supreme Court held that, in order for “constructive taking” to occur, it is necessary to look at the intention of the government in exercising its regulatory authority and the owner’s loss of the use of the property. As such, the courts must look at what advantage the state obtained by the acquisition of the land and its effect on the property owner.

Therefore, in order for an “acquisition” by the government to occur, the property does not actually have to be acquired. If the government takes steps to acquire a beneficial interest in the property and the owner loses its reasonable use of the land as a result, the land can be deemed to be expropriated on a de facto basis (or “constructively taken”).

In applying the test in the Annapolis case, the Supreme Court held that there were more issues to unravel and therefore the Court of Appeal decision was overturned and the matter is to be determined by trial.

What this means

Although the law in this area is not yet settled, the Annapolis decision is being hailed as great news for developers and property rights holders in general.

It should be kept in mind the test for constructive taking is still onerous.

The court emphasized in this case that in order for it to occur, private property rights must be “virtually abolished”. And even where that is deemed to have occurred, it is not yet clear what it means for the government to gain a beneficial interest in the land.

In the Annapolis case, the court accepted that the government essentially using the land as a public park can constitute such an interest. Therefore if the public benefits from the land, that could be deemed to be a benefit to the state as well for the purposes of the test.

It will be interesting to see what will become of this decision going forward.

But for now developers should take note, as this case is definitely a step in the right direction.

To be clear, governments still have the power to expropriate land if the proper channels are followed. However, the Annapolis case shows courts may not have tolerance for the state using back-door means to deprive property owners of the benefits of their land.

Source Real Estate News EXchange. Click here to read a full story

Retail Trends Include Downsizing, Outsourcing Packing And Shipping Of Online Orders

Historically, the Canadian retail sector has often been slow to adopt new methods of fulfillment, but that is changing fast.

According to Michael Ward, chief executive of IKEA Canada, big box retailers such as IKEA are catching up in part through the establishment of smaller stores in downtown areas and working with third-party providers to handle fulfillment.

“Accessibility is the name of the game,” he says. “The urban strategy is understanding where people are.”

In June, Aura, the company’s “new retail concept” store, opened at the corner of Yonge and Gerrard streets in downtown Toronto. The 66,000-square-foot store – smaller than most regular IKEA stores – is part of the company’s transformation strategy, which brings IKEA closer to where customers live and work, Mr. Ward says.

Also part of the strategy is using the services of third-party fulfillment providers because, unlike big box stores found in less intensified areas, smaller stores don’t have the space for in-house fulfillment centres.

Some retailers are rejigging stores by dedicating front-of-house space for try-on or emergency goods while the rest becomes a warehouse.

“Our stores are 1,500 to 2,000 square feet on average,” says Patrick Jobidon, president of PenguinPickUp, which IKEA uses for order fulfillment. “We are not a warehouse. We are a parcel holding company that has a lot of velocity. About 80 per cent of the orders that we receive will be picked up either that night or next day. With such a small footprint you need velocity.”

Customers who aren’t using home delivery can use the service to do pickups and returns, and after hours, can pick up packages from lockers at PenguinPickUp locations. (The company has 35 locations nationwide, including downtown Toronto, Montreal and Vancouver, with plans to open five more by the end of this year.)

“That’s the challenge for retailers,” Mr. Jobidon says. “The power has shifted to the consumer. They want everything right away. That is adding cost to the retailer, [which] forces them to find other ways to save money. We are one of those solutions.”

Mr. Jobidon predicts that in the next five to 10 years, more companies will be renting space to be used as mini-sortation centres so they can access the downtown more quickly – tough to do now because of volume and road traffic.

The onslaught of delivery orders was in part due to the drastic drop in in-store shopping during pandemic restrictions.

Even boomers, the sector with the highest disposable income who were once hesitant to shop online, are now buying from “e-tailers,” says Kostya Polyakov, Canadian national industry leader for KPMG’s consumer and retail practice.

“The folks with the most money all of a sudden went online.”

The rise of e-commerce and decrease of in-store shopping is not a new trend, it’s just more visible now, says Mr. Polyakov, pointing to recent KPMG research that shows a decrease in the number of retail leases, as well as the value of smaller-footprint retail leases.

“So, what the big box stores are fundamentally asking is: What are you trying to buy online versus why you would come in-store,” he adds.

But consumers still desire in-person interaction, according to John Ballantyne, chief operating officer of RioCan, a REIT that owns, manages and develops more than 200 retail, residential and mixed-use properties.

uct mixes to better meet their demands.

“Physical store networks in well-populated neighbourhoods are forms of last-mile distribution or delivery facilitation centres,” he says.

Mr. Ballantyne says retailers are looking for cost-effective solutions, factoring in Canada’s geography, the high cost of last-mile deliveries and the challenges of setting up distribution centres in urban settings.

“Inflationary pressures have increased development costs in areas with a tight supply of quality retail assets, further exacerbating an existing supply and demand imbalance,” he adds. “Demand for this type of space is growing.”

Meanwhile, Mr. Ward says IKEA is aiming to open similar Aura locations in more Canadian cities to create a network of connected initiatives, as opposed to big box standalone stores.

In essence, Aura offers shoppers the IKEA experience, but on a smaller, more accessible scale that makes it easy for people to pop into a store on their way home from work.

“That’s the genesis of the next level of ideas,” he says. “[Competitors] are experimenting for sure. Everybody’s trying to figure out what the right combination is.

“It’s not about online or bricks and mortar,” he adds. “It’s how those things work together.”

Source The Globe And Mail. Click here to read a full story

Interest on Interest: Rising Rates Lead to Reduced Proposals in UrbanToronto Pro August Report

The Toronto real estate market continues to experience low levels of activity, as interest rate hikes, price drops, and policy uncertainty continued in August of 2022.

New proposals for development came in at 9 applications, compared to 24 applications in August of last year. This represents a decrease of 62% year-over-year. The number of applications this year was also a disappointment compared to longer historical trends, as the median number of applications submitted in August from 2017 to 2021 was 11.

As the total number of proposed projects decreased, the total proposed gross floor area decreased as well. Developers are asking to build 5.48 million ft² of GFA across 1.07 million square feet of site area. This is 32% less than the 7.25 million ft² of GFA proposed last year, over 1.17 million ft² of site area.

A similar trend can be seen in the number of proposed new dwelling units. 7,139 new units were proposed this month, compared to 8,140 units last year – a decrease of 14%. This relative resiliency is driven by much smaller space for residential purposes: this month’s average residential GFA per unit was 709 ft², while last year’s average was 820 ft².

There has been a corresponding decrease in the amount of parking proposed per new dwelling unit. This month 0.36 parking spots were proposed per new dwelling unit on average, compared to 0.65 parking spots per unit last year – a decrease of 80%. It should be noted that this decrease is largely due to one particularly large proposal for 5,000 parking spots. Excluding this proposal, the average number of parking spots per unit would be 0.42, only slightly lower than last year’s figure. Between last year and this year, the City of Toronto dropped minimum parking requirements for new developments.

All in all, these numbers suggest that developers are responding to current market conditions by proposing smaller, lower-density projects. The increased uncertainty about costs and prices is leading to fewer units. The question, however, is why developers are also proposing smaller units as well. One possibility is that developers are anticipating that buyers will be increasingly looking for affordability, and smaller units represent a way to offer more affordable options. Another is that developers are concerned about the difficulty of selling larger units in the current market.

Whatever the reasons may be, it is clear that the current market conditions are having an impact on the types of development being proposed. And with interest rates expected to continue rising and prices remaining unstable, it is likely that this trend will continue in the months to come.

Looking forward, it will be interesting to see if these trends continue or if developers begin to propose larger, more dense projects as the market begins to recover. While this may be negative news for those hoping for a quick rebound in the real estate market, it is encouraging to see that developers are being responsive to changing conditions. 

Despite the small number of applications, we have data on 144 companies working to bring these projects to life. Of these, below we list the 22 developers and architects. 

Proposals are an indicator of developer confidence for future demand in the city. As the economic environment continues to cast uncertainty about the future of prices, costs, and policies, expect less ambitious developments going forward. 

If you want to track all of this information live as it comes in, with your ability to customize reports and maps, set up a call about getting a tour of UTPro.​

UT Pro is UT’s premium database service that collects and reports information on development applications across the Greater Toronto Area.

​​​​This UTPro New Development Report analyzes new development proposals for large projects submitted to the City of Toronto. (UrbanToronto defines a “large project” as anything larger than a typical detached home.) These numbers are for proposals only, and are subject to change at any time up until (and sometimes even after) completion. Due to the early stage of the development process, some documentation may be missing; the numbers for some components of the data might not add up in some cases. 

If you would like to stay updated on the latest development news, sign up for a free trial of the New Development Insider. And if you are interested in the data used to generate this report, you can get more details about the UTPro subscription database service here or on the official UTPro page. If you require an instant report on a specific area in the city, check out our Instant Reports.

For more information about UTPro, contact Edward Skira.

Source Real Estate News EXchange Click here to read a full story

Summit Industrial Buys Second Dev. Site in Kitchener Business Park

Summit Industrial Income REIT is continuing to grow its development pipeline in the area surrounding Toronto. The trust and an unnamed partner will acquire a second plot of industrial land in the Grand River West Business Park in Kitchener.

Summit (SMU-UN-T) and its partner have waived conditions on the 26.5-acre development site and will acquire a 50 per cent interest in the project in an all-cash transaction. They will pay $12.9 million for their stake in the site.

“We are pleased to be adding this site to our existing pipeline of development projects in this region, one of Canada’s strongest industrial markets,” said Summit Industrial REIT chief operating officer Dayna Gibbs in the announcement.

“Not only is this one of Canada’s tightest industrial markets, but we continue to build on our economies of scale in this area while adding to our portfolio of LEED-certified buildings upon completion.” 

Summit expects to close on the deal by the end of October.

Three Grand River West Business Park properties

In February, Summit acquired a similar 50 per cent interest in an adjacent 19.5-acre site at the Grand River West Business Park.

Summit intends to acquire the other 50 per cent interest in this property once the development is complete and stabilized. 

It also owns another property in the area, giving the trust additional economies of scale.

Grand River West is located in an established business park close to a regional airport, major highway and railway transportation links and a planned GO commuter rail service station. 

The 26.5-property is expected to accommodate two buildings totalling approximately 480,000 square feet of class-A space with street exposure, multiple access points, circulation and trailer parking. 

Current plans include a 400,000-square-foot building with 40-foot clear ceiling height. Summit intends to have both buildings designated as LEED-certified in keeping with its environmental sustainability mandate.

The 19.5-acre site is expected to accommodate one 360,000-square-foot building with a proposed 40-foot ceiling height, including three road access points and a large area for truck and trailer parking.

Summit will also seek LEED certification for this development.

“The Kitchener, Waterloo, Cambridge market, including Guelph where we own interests in other ongoing development projects, is currently Canada’s tightest industrial market with only a 0.6% availability rate,” Gibbs said in February when the first acquisition was announced.

“The strong demand for industrial space in and around the Greater Toronto Area is driving increased rental rates and strong stable occupancies in this region, making it an attractive development market for the REIT.”

About Summit Industrial REIT

Summit Industrial Income REIT is an unincorporated open-end trust focused on growing and managing a portfolio of light industrial properties across Canada.

Source Real Estate News EXchange Click here to read a full story