Top Sales and Leases Recognized in Canada

The $1.35 billion sale of three urban data centres in Toronto by publicly traded Allied Properties Real Estate Investment Trust was Canada’s largest real estate transaction during the third quarter, making it one of the top deals recognized in the latest CoStar Power Broker quarterly awards.

The Toronto-based landlord said the sale of the locations at 151 Front St. W250 Front St. W and 905 King St. W to a subsidiary of Japanese telecommunications giant KDDI allowed it to focus on its core business of “distinct urban workspace” and pursue continued growth in net operating income and creating value for its properties.

The REIT used $755 million of the proceeds from the sale to repay all amounts drawn on its unsecured credit facility, set aside $200 million of the proceeds to repay a secured promissory note payable on December 31, 2023, and another $49 million to repay its remaining first mortgages on fully owned properties next year. Allied will use the rest of the proceeds to fund its development and upgrade activity over the remainder of 2023 and into 2024.

The Japanese company created a new subsidiary for the deal called KDDI Canada.

“The global data business is accelerating, and the need for data centers is increasing,” said the Japanese company when it first announced a deal in June.

The deal closed on Aug. 16. Peter Senst of CBRE and, Justin Bosa and Peter Zorbas of Scotiabank were the listing agents.

There was no buying agent.

Here’s a look at other top deals during the third quarter:

Top Office Lease

Learningwise Education Signs Lease in Vancouver

The largest office lease in the quarter was in Vancouver. (CoStar)

The quarter’s top office lease was in British Columbia’s largest city, where Learningwise Education Inc. signed a 90,000-square-foot lease in Vancouver.

The educational company subleased a 90,000-square-foot location at 1090 W Pender Street in BentallGreenOak’s downtown Vancouver office building.

Learningwise Education Inc., the parent company of University Canada West, will occupy floors from the third to seventh under the lease signed Sept. 6. The company plans to move in on April 1, 2024.

Jeffrey Lin, vice-president of leasing, acted for BentallGreenOak, which is known as BGO.

No tenant representative was listed.

Top Retail Lease

Home Société Signs Largest Lease of the Quarter.

The top retail lease of the quarter was signed in Toronto. (CoStar)

The largest retail lease of the quarter space was in the Toronto submarket of Moss Park/Regent Park.

Home Société signed a lease on July 1 for the first and second floors of a residential project by Great Gulf and Hullmark at 48 Power Street. The deal is for the retailer’s MUST division, which describes itself as selling “distinctive decor elements” including armchairs for your living room and rustic wood headboards for the bedroom.

The lease for 43,000 square feet is for 10 years. Jonathan Weinberg of First Gulf was the leasing representative on the deal. The tenant contact is Home Société.

Top Industrial Lease

Lactalis Canada Inks Lease for Environmentally Friendly Industrial Space

The largest industrial lease of the quarter is for a facility to be built east of Toronto in Oshawa. (CoStar)

A proposed property at 1680 Thornton Road North in Oshawa, about 60 kilometres east of Toronto, is the largest industrial lease of the quarter.

Leased by Lactalis Canada, the 379,000-square-foot facility would be located in the growing Northwood Business Park. The building would be able to store up to 60,000 pallets in both cooler and freezer environments while being zero-carbon ready, potentially being zero-carbon building certified.

The energy source would be entirely on the Ontario power grid with no additional reliance on non-renewable energy sources. The heat created from refrigeration systems is being designed to be reclaimed so it can heat the facility’s offices and warm the truck apron to melt snow.

A white roof would help would help reflect heat from the sun. Solar panels on the top in a future phase would provide renewable power to partially or wholly offset reliance on the power grid under certain conditions.

Kyle Hanna and Fraser McKenna of CBRE were the tenant representatives on the deal signed on September 19, which kicks in on January 1, 2024. Tenants are expected to move on October 1.

Source CoStar Click here to read a full story

Top Retail Leases Recognized for Toronto

Prominent retail leases signed by SportChek, Home Société and A Plus Sport negotiated by top dealmakers from SmartCentres Real Estate Investment Trust, First Gulf, CBRE and MQ Real Estate Team are among the third-quarter retail leases recognized by CoStar.

As big-ticket items involving sizable investments, commercial property transactions often have a wider impact within the community. CoStar will recognize the largest leases completed each quarter and the dealmakers who made them happen in their respective markets.

Here are the Toronto retail leases selected as the third-quarter 2023 winners of the CoStar Power Broker Quarterly Deal Awards:

 

162 Queen St. N, Toronto, ON (CoStar)

Space Leased: 45,000 SF

Deal Type: New Lease

Size: 87,977 SF

Tenant: SportsChek

Brokers Involved: Luke Moore of SmartCentres Real Estate Investment Trust represented the landlord.

Deal Commentary: SportsChek struck a deal in the third quarter to occupy half of this former department store building, which is part of the Walmart-anchored SmartCentres Etobicoke Index at 162 Queen St N. The former Sail location will be occupied by SportChek along with an updated and expanded Mark’s, both of which are part of the Canadian Tire Corp. retail group. SmartCentres Etobicoke and SmartCentres Etobicoke Index shopping centres consist of approximately 624,000 square feet of open-air retail space across 54 acres. The centres straddle North Queen St. at Highway 427 and The Queensway beside Sherway Gardens within Toronto West’s southern Etobicoke retail node. Both retail properties are owned and managed by SmartCentres Real Estate Investment Trust.

48 Power St., Toronto, ON (CoStar)

Space Leased: 43,500 SF

Deal Type: New Lease

Size: 460,620 SF

Tenant: Home Société

Brokers Involved: Jonathan Weinberg of First Gulf represented the landlord.

Deal Commentary: Home Société’s lease for a large block of retail space on the first and second floors of this Toronto office building for its MUST furniture division qualified as a top retail deal of the third quarter. The furniture design company’s new store space in downtown Toronto is part of a new condominium complex in the Moss Park/Regent Park neighbourhood known as Home Power and Adelaide managed by Great Gulf Group.

2225 Erin Mills Parkway, Mississauga, ON (CoStar)

Space Leased: 30,311 SF

Deal Type: New Lease

Size: 537,085 SF

Tenant: A Plus Sport

Brokers Involved: Phillip Cheung and Evan S. White of CBRE represented the landlord. Mya Qi of MQthe Real Estate Team represented the tenant.

Deal Commentary: In one of the quarter’s largest retail leases signed in an enclosed mall, A Plus Sport committed to opening a new location spanning over 30,000 square feet at the Sheridan Centre in Mississauga. The new facility will be a hybrid recreational centre, featuring badminton and volleyball courts, golf simulators and general recreational facilities for children, as well as retail space dedicated to sporting goods. The lease marks the first retail concept for A Plus Sport in the Toronto market. The mall is owned by Dunpar Homes, which focuses on master-planning commercial and industrial sites in prime areas in the Greater Toronto Area into vibrant, livable communities.

162 Queen St. N, Toronto, ON (CoStar)

Space Leased: 25,000 SF

Deal Type: New Lease

Size: 87,977 SF

Tenant: Mark’s Work Wearhouse

Brokers Involved: Luke Moore of SmartCentres Real Estate Investment Trust represented the landlord.

Deal Commentary: In a second top third-quarter deal for SmartCentres Etobicoke retail complex, an updated and expanded Mark’s Work Wearhouse will join SportsChek in reactivating this former department store building.

590 King St. W, Toronto, ON (CoStar)

Space Leased: 13,200 SF

Deal Type: New Lease

Size: 90,000 SF

Tenant: Greta Bar

Brokers Involved: Brandon Gorman, Graham Smith and Matthew Marshall of JLL represented the tenant.

Deal Commentary: Greta, which has locations in Calgary, Edmonton and Vancouver, is bringing its arcade bar street food concept to Toronto after signing a lease in the third quarter at 590 King Street West in Toronto. Located in the King West and Bathurst area, the office building is owned by YAD Investments, a private Canadian-owned company headquartered in Toronto.

Source CoStar Click here to read a full story

Two of Canada’s Largest Retail REITs Report Supply Crunch Amid Rising Construction Costs

Higher interest rates are top of mind for two of Canada’s largest retail REITs reporting earnings this month, with both RioCan and First Capital saying they expect those costs will keep the supply of available retail space tight.

Toronto-based RioCan, Canada’s oldest real estate investment trust with a portfolio of 200 buildings across the country, told analysts it does not expect retail vacancy to change much in the coming years.

“All indicators are that the type of space RioCan offers will continue to be in short supply and high demand. But our operating results are rooted in factors far more deep-seated than favourable supply-demand dynamics,” said Jonathan Gitlin, chief executive of RioCan, in a conference call with analysts last week.

For the third quarter that ended Sept. 30, the REIT reported a net loss of $73.5 million compared to a profit of $3.2 million last year.

The decrease was mainly attributed to fair value losses of $199.5 million on investment properties in the third quarter compared to $118.8 million in the third quarter of 2022, primarily from increasing capitalization rates to reflect current market conditions resulting from higher interest rates.

“Who knows if interest rates will move up, down or stabilize? What I do know is that at times like these, RioCan is fortunate to be operating a best-in-class retail portfolio in the major markets of this great country,” said Gitlin.

Higher Construction Costs

Retail committed occupancy for RioCan reached an all-time high of 98.3%, and the REIT’s average rent per square foot for new deals was $27.02, more than the average net rent for the portfolio at $21.39.

However the reality of present market conditions and construction costs has RioCan opting to slow down on new projects.

“Just to clarify, we’re pulling back on construction, not development, which means that we continue to move the needle forward on getting properties entitled, getting them free of tenant obligations and things of that nature so that they are shovel-ready. So it’s construction that we’re pulling back on,” said Gitlin.

At rival First Capital REIT, which has property interests in 143 Canadian neighbourhoods with 22.3 million square feet of gross leasable space, Chief Executive Adam Paul had the same type of message.

“Starting with inflation, concerning replacement costs as well as tenant sales, replacement costs have escalated significantly over the past few years,” said Paul on a call with analysts.

He said replacement costs for the retail space the REIT owns are almost 50% higher than the market value of the properties today. “This dynamic will continue to keep new supply effectively muted as has been the case for several years,” said Paul.

For the third quarter, First Capital recorded a loss of $327.5 million compared to a loss of $204.7 million a year earlier. Included in that loss was a $434.1 million writedown on the value of its properties compared to a $271 million writedown a year earlier.

Retail Demand Strong

Mark Rothschild, an analyst with Canaccord Genuity, the global capital markets division of Canaccord Genuity Group Inc., issued a report this week saying he agreed that demand for retail space should remain strong, resulting in continued low availability rates.

“We do note, however, that potential slowing economic growth could moderate rent growth. Tight availability for retail space in Canada has led to upward pressure on market rents,” Rothschild said in the note.

JLL Canada’s fall retail report noted that the continued demand for physical space and a shortage of new space is keeping the Canadian retail market tight with availability at historically low levels.

“After the surge in e-commerce during the pandemic, Canadians have returned to brick-and-mortar stores, shopping centres, restaurants, and airports. Demand for retail space continues to outpace supply this year, although this demand is now easing and expected to align with supply in the coming quarters,” said the real estate company.

The company added a slowdown in housing construction could also affect demand for retail.

“The slowdown in housing construction is impacting the retail sector, especially now that retail is increasingly built with residential. The decline in investment in building construction, including both commercial and residential projects, creates a challenging environment for retailers and will have implications for the growth and expansion of retail spaces in coming years,” said JLL.

Source CoStar Click here to read a full story

Top Office Leases Recognized for Greater Toronto

Prominent office leases signed by Celestica, H.H. Angus and Payment Solutions Providers Services negotiated by top dealmakers from Metrus Properties are among the third-quarter office leases recognized by CoStar.

As big-ticket items involving sizable investments, commercial property transactions often have a wider impact within the community. CoStar will recognize the largest leases completed each quarter and the dealmakers who made them happen in their respective markets.

Here are the Greater Toronto office leases selected as the third-quarter 2023 winners of the CoStar Power Broker Quarterly Deal Awards:

 

1176 Eglinton Avenue, Toronto, ON (CoStar)

Space Leased: 56,350 SF

Deal Type: New Lease

Size: 454,301 SF

Tenant: Celestica

Brokers Involved: Gabrielle Mair of Metrus Properties represented the landlord.

Deal Commentary: After Toronto-based electronics manufacturing services firm Celestica Inc. entered into an agreement earlier this year to sell its Don Mills property, which includes the site of its corporate headquarters and its Toronto manufacturing operations to a special purpose entity formed by a consortium of three real estate developers, Diamond Corp., Lifetime Developments and Context Development Inc. The consortium plans to work with Toronto officials to win approval for a mixed-use redevelopment that includes office, retail and residential uses, Celestica entered into an interim lease for its existing head office and manufacturing premises on a portion of the real estate for an initial two-year term on a rent-free basis subject to certain payments including taxes and utilities. In the third quarter, the tech firm secured replacement space by signing a long-term lease for the 8th and 9th floors in a new office tower at Don Mills and Eglinton to be developed by Metrus near a Metrolinx Station in Crosstown Place, a new master-planned encompassing 60 acres. However, on the day it leased the space, Celestica subleased it to H.H. Angus, which leads us to the next deal.

1176 Eglinton Avenue, Toronto, ON (CoStar)

Space Leased: 56,350 SF

Deal Type: New Lease

Size: 454,301 SF

Tenant: H.H. Angus

Brokers Involved: Gabrielle Mair of Metrus Properties represented the landlord.

Deal Commentary: Celestica subleased the two floors it had in a soon-to-be-completed office building at 1176 Eglinton Ave. The space is expected to serve as a head office for H.H. Angus, an employee-owned, independent consulting firm of engineers, technical specialists and project managers.

400 Applewood Crescent, Vaughan, ON (CoStar)

Space Leased: 39,913 SF

Deal Type: Renewal

Size: 193,638 SF

Tenant: Payment Solutions Providers Services

Brokers Involved: Gabrielle Mair of Metrus Properties represented the landlord.

Deal Commentary: Payment Solutions Providers Services, which assists clients to design, deploy, and manage secure networks and transaction routing for processing online transactions, renewed its lease to occupy just under 40,000 square feet of office space at 400 Applewood Crescent in Vaughan. The office building is owned by Concord, Ontario-based Metrus Properties.

20 Queen St. W, Toronto, ON (CoStar)

Space Leased: 34,975 SF

Deal Type: Renewal

Size: 759,528 SF

Tenant: Koskie Minsky

Brokers Involved: David Fullerton, Allen Brusilow and Matthew McCusker of JLL represented the landlord.

Deal Commentary: Law firm Koskie Minsky LLP renewed its lease for two full floors in the Cadillac Fairview Tower in a third-quarter deal. This Cadillac Fairview-owned office property in downtown Toronto is located near the CF Eaton Center shopping center.

4950 Yonge St., Toronto, ON (CoStar)

Space Leased: 17,647 SF

Deal Type: New Lease

Size: 445,000 SF

Tenant: Swift Offices

Brokers Involved: Patrick Langdon of Langdon Partners Limited represented the landlord.

Deal Commentary: In a top third-quarter deal, Swift Office signed a lease in the Madison Executive Centre. The 24-storey office property situated in downtown North York is owned by Europro, a commercial property management company that has expanded to managing real estate assets in 10 cities province-wide.

Falling Construction Prices Don’t Translate Into Warehouse Oversupply

Higher Rates, Slower Economic Outlook Keeps Supply Growth in Check

The spike in demand for modern logistics space in recent years has led to more projects breaking ground. Yet the new supply pipeline remains disciplined.

In fact, under-construction projects as a percentage of inventory have declined in 2023 relative to last year. This decline occurred even as construction costs for warehouses fell across all Canadian major metropolitan areas. The higher interest rate environment and signs that the country’s economy continues to decelerate likely explain, in part, why new supply growth is moderating. This disciplined supply pipeline should help the sector weather any bumpiness that could occur from a potential recession.

With e-commerce demand pulled forward thanks to the pandemic and more resilient supply chains put in place by many companies to address goods shortages, overall demand for modern logistics space in Canada was exceedingly strong over the past few years. This demand can be seen in the availability rates for industrial space across markets. Although space availability has risen as new supply is delivered to market, it has remained at or below long-term trend levels in most cities.

This strong demand growth and limited availability of modern industrial space led developers to break ground on new projects. In fact, under-construction stock as a percentage of existing inventory increased rapidly across Canadian markets between 2020 and 2022.

This rapid rise in warehouse construction also helped lead to a jump in construction costs. These costs were also affected by a jump in apartment construction activity and a more generalized increase in wage pressures, as labour shortages in many parts of the economy became commonplace. However, since 2022, warehouse construction costs have been falling across all Canadian markets. The fall in prices has been rapid. In Montreal, for example, warehouse construction prices were growing at over 22% annually as of the fourth quarter of 2021; since then, cost growth has fallen to 10% as of the second quarter of 2023.

Still, warehouse construction costs remain well ahead of inflation as measured by the consumer price index. At the same time, interest rates remain at elevated levels compared to the recent past, making it harder to finance new projects. This environment is making it more difficult for developers to make their pro forma numbers work. As such, development activity, while still solid, has started to moderate in major markets compared to a year ago. The country’s lackluster economic performance since the rate-hiking cycle began may also be causing some developers to pause. In nominal terms, Canada’s economy has been flat for the last three quarters, although adjusting for inflation, the economy has already started to shrink slightly.

Although construction activity has started to moderate, developers are still obtaining permits to build new warehouses at a faster rate than before the pandemic. For example, in Toronto, around four permits per month are issued to build new warehouse developments as of mid-2023, which is higher than the three permits per month issued before 2021. Still, the level of permitting has declined substantially from the five to seven permits per month that were issued between 2021 and 2022.

Although new supply is controlled in large cities, one area for concern is smaller cities in Ontario, outside of the Greater Toronto Area, or GTA. Permits per month for new warehouse construction are relatively steady in British Columbia, Alberta, and Quebec when comparing current monthly levels to those of 2019. However, permitting in Ontario jumped in 2021 and remains elevated, in contrast to the declining trend for Toronto. This suggests that many smaller cities outside the GTA could see increased levels of warehouse construction in the coming quarters.

Much of this permitting activity is likely in the Greater Golden Horseshoe, or GGH, a large swath of territory that surrounds the GTA on the Southwest, North, and East. Developers have been breaking ground in many smaller cities of the GGH as industrial land availability in the GTA becomes harder to find. This could potentially leave some of these smaller GGH areas at risk of oversupply in the event of an economic downturn.

Despite more affordable construction prices, the industrial supply pipeline remains relatively disciplined, although one area for concern for oversupply could potentially be smaller cities outside of the Greater Toronto Area. This discipline is partly due to higher financing costs related to the rapid rise in the country’s interest rates, coupled with greater caution with respect to Canada’s near-term growth prospects. In addition, although warehouse construction costs have come down, they do remain elevated. Together, these factors help explain why the country’s construction pipeline for new industrial product remains under control. The fact that new supply does not appear to be getting ahead of existing demand suggests that the industrial sector is likely well-positioned to weather an economic downturn when it arrives.

Source CoStar Click here to read a full story

Top Industrial Leases Recognized for Toronto

Prominent industrial leases signed by Lactalis Canada, The ProLift Rigging Company Canada and Stage Windows and Doors negotiated by top dealmakers from CBRE and Colliers are among the third-quarter industrial leases recognized by CoStar.

As big-ticket items involving sizable investments, commercial property transactions often have a wider impact within the community. CoStar will recognize the largest leases completed each quarter and the dealmakers who made them happen in their respective markets.

Here are the Greater Toronto industrial leases selected as the third-quarter 2023 winners of the CoStar Power Broker Quarterly Deal Awards:

 

1680 Thornton Road N, Oshawa, ON (CoStar)

Space Leased: 379,000 SF

Deal Type: New Lease

Size: 379,000 SF

Tenant: Lactalis Canada

Brokers Involved: Kyle Hanna and Fraser McKenna of CBRE represented the tenant.

Deal Commentary: In one of the largest industrial deals of the third quarter, Canadian dairy product producer Lactalis Canada Inc., the company behind such popular brands as Cracker Barrel, Black Diamond, Balderson, Astro and Lactantia preleased a new distribution facility in Oshawa, east of Toronto. The company, a subsidiary of France-based Lactalis Group, signed a long-term lease for a new 379,000-square-foot distribution centre at 1680 Thornton Road North that is set to open in the fourth quarter of 2024 being developed by Montreal-based Broccolini and designed by GKC Architecture and Design. “Lactalis Canada’s new facility in Oshawa will become the largest distribution centre, from a capacity standpoint, for Lactalis Group globally,” said Mark Taylor, president and CEO of Lactalis Canada, in a statement. “This bold step exemplifies Lactalis Canada’s growth ambitions in Canada as a dairy leader and, more importantly, reinforces our continued commitment and investment in the country and communities in which we operate.” The new facility will be used to consolidate multiple shipping locations the company operates serving its cheese and tablespreads category, including an internally operated centre in Belleville, Ontario.

96 Inspire Blvd., Brampton, ON (CoStar)

Space Leased: 162,500 SF

Deal Type: New Lease

Size: 162,500 SF

Tenant: The ProLift Rigging Company Canada

Brokers Involved: Kyle Hanna, Pat Viele and Frank Protomanni of CBRE represented the landlord. Colin Alves of Colliers represented the tenant.

Deal Commentary: In another large industrial prelease signed in the third quarter, a rigging company agreed to prelease a new warehouse under construction in Brampton set to reach completion in March 2024. The tenant, ProLift Rigging, is based in Lynchburg, Virginia, and provides lifting, rigging, and relocation services.

140 Great Gulf Drive, Concord, ON (CoStar)

Space Leased: 126,785 SF

Deal Type: New Lease

Size: 178,303 SF

Tenant: Stage Windows and Doors

Brokers Involved: David Hoffman and George Siotas of Colliers represented the landlord.

Deal Commentary: Stage Windows and Doors, a company that manufactures energy-efficient windows and doors, struck a deal in the third quarter to lease more than 126,000 square feet in this warehouse facility in Vaughan, Ontario, owned and managed by Manulife Financial Corp.

 

35 Bertrand Ave., Toronto, ON (CoStar)

Space Leased: 67,373 SF

Deal Type: New Lease

Size: 67,373 SF

Tenant: Stephenson’s Rental Services

Brokers Involved: Fraser McKenna and Mike McFarlane of CBRE represented the landlord.

Deal Commentary: Stephenson’s Rental Services, a fast-growing equipment rental services company, struck a deal in the third quarter to lease Amdev Property Group’s manufacturing building at 35 Bertrand Ave. in eastern Toronto.

Source Renx.ca Click here to read a full story

Pricing Uncertainty Rules CRE Markets

Uncertainty about asset prices is expected to remain a key factor limiting transaction volumes, while deals that do proceed will likely be smaller as large investors pull back from the market and less capital is available for real estate acquisitions.

That was one of the major observations featured in PwC and Urban Land Institute’s just-released 2024 Emerging Trends in Canadian Real Estate report, which was augmented by a presentation from PwC Canada national real estate leader Frank Magliocco and a panel discussion involving industry leaders at Toronto’s The Carlu on Nov. 14.

The findings came from interviews with 209 Canadian real estate executives, who by and large weren’t as optimistic as those who had contributed to the previous year’s report.

A prevailing theme was that companies will be cautious and move slowly, with some pauses in investment and development, over the next year or two until they see more certainty in the market.

Allied and Fengate being cautious

Allied Properties REIT (AP-UN-T) is one of those cautious real estate owners. So far in 2023 it has sold data centres, paid down debt and invested in its core portfolio as it maintained liquidity of between $800 million and $900 million.

President and chief executive officer Cecilia Williams, one of the panellists, said Allied doesn’t plan to allocate any incremental capital to acquisitions next year.

“Our focus in 2024 will be to complete development activities currently underway, complete upgrade activities and lease-up vacant space,” said Williams.

“We’ve repositioned our balance sheet for strength and flexibility, and we are in capital and liquidity preservation mode.”

“When we get into a project, we always make sure that we have the equity available for it,” said another panellist, Fengate managing director and group head of real estate Jaime McKenna.

“So we’re not in a position where we need to raise capital to actually execute on the transaction.”

The rising cost of debt, however, has put Fengate in a position where it’s either pausing on making moves or taking longer to make decisions.

Optimizing portfolios and operations

“In times like this with capital scarcity, people want to ensure that they have the best positioned portfolios that are operating in the most efficient way,” Magliocco observed.

“Most leaders don’t believe that we can actually wait this out and instead we need to start to rebalance and reposition and optimize portfolios to focus on what lies ahead.

“That’s going to be critically important to position themselves as they emerge from this period of uncertainty in a much stronger form.”

Assets that were once considered core may no longer be and some owners are looking to pivot with their asset mixes or look to niches including data centres, student housing and medical offices to generate higher returns.

Panellist and Starlight Capital CEO and chief investment officer Dennis Mitchell believes most large Canadian real estate developers, managers and owners have great relationships and deep pools of capital.

Thus, he expects real estate will continue to appeal to source capital as long as returns justify it.

Mitchell would like to see more innovation in the Canadian real estate market, including the creation of pure-play data centre and cellular tower real estate investment trusts, as well as a larger focus on student housing.

Magliocco said generative artificial intelligence — which can generate high-quality text, images and other content based on data received — “has the potential to really revolutionize the rules of the game and could have a pretty profound impact on the overall strategy in achieving portfolio and operational optimization.”

Bigger emphasis on ESG

Environmental, social and governance (ESG) considerations have become critical levers as building owners and investors realize they can help preserve long-term asset values while also creating value through improved operating cash flows and more attractive capital from lenders and investors.

Panellist and Infrastructure Ontario chief ESG officer Toni Rossi said people have to stop thinking about ESG as a cost and consider it an investment.

Institutional real estate investors have traditionally been more focused on ESG than private developers and owners, but the tide appears to be turning.

“We get pressures from institutional capital, which wants ESG to be at the forefront, so we adapt our products and our policies and our investment criteria to achieve what they’re looking for,” McKenna said, adding that enables Fengate to apply similar pressure to its private partners.

“Once you get your house in order, that puts you in a power position with your partners to say ‘We’re going to expect more from you.’ ”

Top Property Sales Recognized for Greater Toronto

The sale of a portfolio of data centers handled by CBRE and Scotiabank and an office disposition arranged by Cushman & Wakefield are among the top third-quarter property sales recognized by CoStar.

As big-ticket items involving sizable investments, commercial property transactions often have a wider impact within the local community. CoStar recognized the largest deals completed during the third quarter in their respective markets.

Here are the Greater Toronto property sales selected as the third-quarter 2023 winners of the CoStar Power Broker Quarterly Deal Awards:

 

151 Front St. W, Toronto, ON (CoStar)

Sale Price: $1,350,000,000

Sale Date: August 16, 2023

Size: 1,670,289 SF

Buyer: KDDI Canada, Toronto, ON

Seller: Allied Properties Real Estate Investment Trust, Toronto, ON

Brokers Involved: Peter Senst of CBRE and Justin Bosa and Peter Zorbas of Scotiabank represented the seller.

Deal Commentary: In one of the largest deals in the third quarter for the market, Allied Properties sold a trio of data centre properties, including a leasehold interest at CBC’s headquarters, to a Japanese telecommunications provider in a CA$1.35 billion deal. The Toronto-based real estate investment trust, hired CBRE Limited and Scotiabank to market the portfolio that included freehold interests in 151 Front St. West and 905 King St. West, as well as a leasehold interest in 250 Front St. West.

 

8200 Warden Ave., Markham, ON (CoStar)

Sale Price: $193,000,000 (allocated)

Sale Date: September 29, 2023

Size: 536,770 SF

Buyer: Veyron & Co, New York, NY

Seller: IBM, Markham, ON

Brokers Involved: Robert Elms and Pat Murphy of Cushman & Wakefield represented the seller.

Deal Commentary: In another top deal from the quarter, IBM sold a pair of office properties to New York-based Veyron & Co. for $191.04 per square foot. The sale-leaseback transaction included the four-storey 8200 Warden Ave. building as well as a second office property in Bromont, Quebec, that has yet to close.

2235 Sheppard Ave. E, Toronto, ON (CoStar)

Sale Price: $165,000,000

Sale Date: July 20, 2023

Size: 922,000 SF

Buyer: Groupe Mach and Sarees Investments, Montreal, QC

Seller: Dorsay Development, Toronto, ON and AIMCo, Edmonton, AB

Brokers Involved: Matt Picken, Bryce Gibson and Tyler Randa of JLL represented the seller.

Deal Commentary: Groupe Mach kicked off the quarter with a blockbuster deal in early July to buy the Atria Business Park in partnership with Sarees Investments. The three office buildings at 2225, 2235 and 2255 Sheppard Ave. E. in North York is considered one of the largest office nodes on the outskirts of downtown Toronto. The purchase expanded Montreal-based Mach’s position in the Toronto market.

81 Royal Group Crescent, Vaughan, ON (CoStar)

Sale Price: $81,500,000

Sale Date: August 18, 2023

Size: 281,265 SF

Buyer: Newmar Alpa Lumber Group, Mississauga, ON

Seller: Oxford Properties Group, Toronto, ON

Brokers Involved: Jonathan Gorenstein of Lennard Commercial Realty represented the buyer.

Deal Commentary: Newmar Alpa Lumber Group, one of the largest suppliers and manufacturers of construction products distributed across Canada and within the United States, accomplished a rare feat in the third quarter by acquiring an industrial building in Oxford Properties’ Vaughan Industrial Park in an off-market transaction. Oxford rarely parts with properties in the industrial park, according to local brokers. The building at 81 Royal Group Crescent is located in Concord, north of Toronto. The sale was arranged by Lennard Commercial Realty broker Jonathan Gorenstein. The property, which occupies a 10-acre parcel and was built in the late 1990s, is currently tenanted by automotive supplier Martinrea, with five years remaining on its lease. A previous furniture supplier tenant went out of business and vacated the property earlier this year.

 

24 Viceroy Road, Concord, ON (CoStar)

Sale Price: $80,500,000

Sale Date: July 18, 2023

Size: 263,074 SF

Buyer: Woodbourne Canada Management, Toronto, ON

Seller: BentallGreenOak, Toronto, ON

Brokers Involved: Peter Senst, Matthew Brown and Kai Tai Li of CBRE represented the seller.

Deal Commentary: Woodbourne, a major investor, operator and developer of apartments, seniors’ housing, student housing, self-storage and other real estate assets, invests primarily in urban areas across Canada on behalf of a broad base of institutional investors, including public and private pension funds, endowments, foundations, and funds of funds, picked up this seven-property industrial portfolio in Vaughan from BentallGreenOak in a third-quarter deal.

Source CoStar Click here to read a full story

Skyline Industrial Acquires New Quebec, Ontario Properties

Skyline Industrial REIT has acquired two newly constructed assets in Quebec and Ontario as it continues to increase its weighting in more modern properties across Canada.

“We’re being selective as we acquire assets right now,” president Mike Bonneveld told RENX, “but I think we’re one of the few groups that’s actively out there looking for assets.”

Skyline’s balance sheet is in a good position, according to Bonneveld, after pruning its portfolio with the disposition of its last office property in February and the sale of other non-core assets over the past few years.

“We got ahead of the curve and I’d love to say we were really smart and knew what was coming, but there was also luck involved,” Bonneveld explained.

“It’s put us in a really good spot where we can be a bit picky and be able to acquire good assets when lots of guys are ‘pens down’.”

Imco New 16 York Headquarters Consolidates Staff From 3 Gta Locations Into 3 Storeys And 66,000 Square Feet

Employers are gradually mandating workers back to their offices, but not without first inducing them with progressive spaces.

Count the Investment Management Corporation of Ontario (IMCO) among a cadre of established corporations in the Greater Toronto Area that have used the pandemic-induced office furloughs of the past few years to reimagine the office experience.

IMCO has consolidated employees from three offices in the GTA into a single location at 16 York St., where it’s taken up residence from the 23rd to 25th floors, comprising 66,000 square feet.

That might have seemed superfluous before the pandemic, but that’s hardly the case today.

IMCO is taking the open-concept office to another level. Rather than sequestering its employees at dedicated workstations, the vast, capacious office space is designed to encourage interaction, incubate creativity and, ultimately, cultivate collaboration between otherwise disparate departments.

The space is also sufficiently spacious to proffer privacy at any number of its workstations. There’s even a multi-function café on premises.

16 York LEED and WELL-certified

Julie Phillips, president and partner at Flat Iron Building Group Inc. — which constructed IMCO’s new office space — told RENX workers have been apprehensive about returning to staid, stuffy offices after several years of working comfortably from home. She’s unsurprised.

That’s why it is no coincidence IMCO choose the 33-storey, 800,000 square-foot 16 York to house its new offices, because it’s both LEED Platinum and WELL Institute-certified. Not only is that important for both a company’s ESG score and reducing its overhead, it’s a recruiting tool.

And while innovative corporate cultures and office designs are inducements, large companies like IMCO are sweetening the pot by taking advantage of vacancies in prime locations like 16 York.

“It’s super accessible to Union Station for people to commute in,” Phillips said.

“With these new buildings, from an air-quality perspective and from an amenities perspective — whether that be parking or bike facilities or nearby restaurants — there’s a flight to quality right now where people are looking to new buildings, especially with vacancy rates being where they are.”

IMCO office decision provides dual benefits

Employers like IMCO have also used the turbulence caused by COVID-19 to make fiscally sound decisions. In consolidating three offices into a single headquarters, IMCO has cut unnecessary costs, Phillips said.

“In addition, it is the way people can flow between departments and share a single lunch room, multiple collaborative spaces and meeting rooms, one reception, one quiet area, rather than separate amenities in three separate places,” she added.

A light-filled collaboration area in IMCO's new Toronto headquarters at 16 York Street. (Courtesy IMCO)
A light-filled collaboration area in IMCO’s new Toronto headquarters at 16 York St. (Courtesy IMCO)

Moreover, unlike earlier in the pandemic when workers enjoyed leverage afforded by a hiring boom fuelled by low interest rates, labour conditions are no longer as tight, turning the tables back in favour of employers.

However, high interest rates haven’t just curbed new job creation. They have also — as seen in Canada’s tech sector that shed 160,000 jobs in 2022 and 100,000 more during the first six weeks of 2023 — forced some companies to downsize.

“A lot of companies were told staff who didn’t want to go into the office would quit and would be difficult to replace, so that was the motivation to let people keep working from home. That was the case 12 to 24 months ago,” Ron Jasinski, senior vice-president of Colliers’ GTA office division, told RENX.

And because, Jasinski added, companies still fervently believe employees are more productive working on-site than remotely, they’re taking advantage of the economic headwinds. Heading into 2024, it isn’t as easy to jump ship and join another company.

“Now companies are laying people off and hiring less,” Jasinski continued. “The pendulum is slowly swinging back the other way.”

“The Hive”

IMCO requires its employees to be at the office at least three days a week — but it’s betting staff will like what they see when they arrive.

The firm hired SDI Design to design the office and conceptualize its culture. Themed “The Hive,” IMCO’s 16 York head office is inspired by the egalitarian nature of beehives, spurning surfeit executive suites in favour of these types of workspaces.

“Even from CEO down, not having private offices in some environments, it got accentuated even more during COVID,” Phillips said.

“Why come to an office if you’re sitting with your head down at a desk, crunching numbers? You should be coming to an office because you need to work with a team, because you need to collaborate, because you need to engage.

“It’s not as effective to work in an office if all you’re doing is working by yourself.”

Source Renx.ca Click here to read a full story