Aoyuan Selects H-Mart Supermarket as Anchor Tenant for Retail Space in M2M Condos

With construction of M2M Condos proceeding as planned, Aoyuan International, the developers of the 8.6-acre master-planned community development in North York, has announced which grocery retailer will be occupying the development’s 36,000ft² retail space. In keeping with the community focussed approach that has guided the project thus far, M2M will welcome the Korean-American supermarket chain H-Mart for the opening of their flagship Toronto store.

Designed by Wallman Architects, the 5-tower M2M community is being brought to life gradually through a phased approach. The first phase consists of two towers, soaring 34 and 38 storeys, built above a shared podium on the southern portion of the site. Phase 1 has been under construction since 2019 and, as of July, had over 40 storeys of progress between the two buildings to show for it. 

The announcement of the opening of H-Mart in the M2M Condos is notable for several reasons, beginning with the sheer size of the 36,000ft² store. A supermarket is a practical tenant for the space, especially in a complex that will soon be welcoming residents to 810 new dwelling units – and that’s only the first phase. But beyond that, selecting H-Mart as an anchor tenant is also a way of recognizing and celebrating the multicultural character that is embedded in the fabric of North York.

A high-end market with an extensive inventory of Asian and international foods offered alongside commonly found western food, is better positioned to serve a diverse population, and reflects Aoyuan’s goal of aiming to build a community that has access to the essentials for a healthy, wellness-oriented lifestyle; for many, this lifestyle begins with food.

As a company, H-Mart has earned recognition internationally for its fast growing business model and progressive approach to grocery, with accolades like ranking 13th on the National Retail Federation’s Hot 100 creating a buzz around the brand. With nearly 100 locations in the U.S and 18 locations already active across Canada, the company’s flagship store at M2M will be a demonstration of the standards they have set for themselves. With a mix of eye-catching design characteristics like curved light fixtures and brick columns, the store will also feature one of H-Mart’s signature food halls, that have excited foodies with a selection of multicultural offerings.

With the promise of 180,000ft² of total retail and commercial space in M2M over phases one and two, the development will also further its commitment to creating a vibrant and well served community through the construction of a community centre and a public park. 

UrbanToronto will continue to follow progress on this development, but in the meantime, you can learn more about it from our Database file, linked below. If you’d like, you can join in on the conversation in the associated Project Forum thread or leave a comment in the space provided on this page.

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Sawtooth-Edged 50-Storey Proposal Would Replace St Clair-Yonge Office Building

The Deer Park sector of Midtown Toronto is in the headlines again with more planning news, this time coming from Manulife Investment Management. Earlier this month, the insurance company’s real estate division submitted a proposal to redevelop the site of 45 St Clair Avenue West with a 50-storey mixed-use residential/commercial building reaching a height of 167m. Designed by Sweeny &Co Architects, the tower grabs attention with its sawtooth-edged treatment of the exterior, while the promise of 629 new dwelling units with 6,106m² of replaced office space and retail at grade speaks to the development’s considerable scale. 

The site, located just west of Yonge Street on the south side of St Clair Avenue West, is currently occupied by a 14-storey office building with a concrete character reminiscent of brutalist style, built in 1969. The building houses a total of roughly 11,000m² of office space, with repeating floor-plates of about 945m², a relatively small size by downtown office building standards. With a surface parking lot occupying the southern portion of the site behind the building and an 11m setback from the St Clair avenue frontage, the 3,134m² property is left with a total site coverage just above 30%.  

The proposal for redevelopment uses this fact to characterize the site as under-utilized, propelling the proponents’ pursuit of an Official Plan Amendment and Zoning By-law Amendments. They have also submitted an application for Site Plan Approval. The submissions make reference to the provincial policy surrounding development in Major Transit Station Areas (MTSAs), which applies to this site based on its closeness to St Clair station on Yonge Line 1, located less than 200m away. The site is also located halfway between stops on the 512 St Clair streetcar route at the intersections with Deer Park Crescent and Yonge Street. 

Beyond the MTSA designation, the site is also considered to be a Protected MTSA (PMTSA), another level to the designation that allows the City to implement inclusionary zoning standards for proposed developments. Inclusionary zoning requires developers to ensure that affordable units are created within new developments, encouraging more mixed-income housing situations throughout the city.

The proposal begins with a 4-storey base building that attempts to set the tone for the building’s massing and scaling with a streetwall that is sensitive to the pedestrian. The base building’s height of 19m is unimposing, and is consistent in scale with the streetwalls of similar buildings in the surrounding area. A total of 567m² of retail space is shared between two units at grade, both fronting onto St Clair Avenue West, while floors 2 through 4 house the entirety of the building’s 6,106m² of office space. The shape of the base building features a cutout section at the northeast corner that sets the building back 15m from the street, creating a square patio area for the eastern retail tenant. 

The patio ties in closely with the proposal’s plans to reinvent the site’s public realm, with a focus on encouraging the use of the space in front of the building in meaningful ways. The patio mentioned above would be furnished with table seating and benches, while another bistro-style patio would occupy the 4m wide space between the streetwall and the sidewalk. The proposal also intends to oversee the planting of nine new trees and planters along the sidewalk to provide shade and greenery for anyone moving through the public space.   

The massing of the base building introduces the sawtoothed character of the proposal at a large scale, featuring angled volumes that protrude out from the rectangular body to set up the smaller, more pronounced triangular volumes above. Above the base building, triangular balconies continue the sawtoothed motif, while more triangular protrusions wrapping around all faces of the tower create the appearance of chamfered corners.

An outdoor terrace appears on the roof of the base building, and wraps around the tower on all sides but the south, creating 904m² outdoor amenity space that is accessed from an indoor amenity level occupying the full floor plate of the tower’s initial level (the fifth storey). From that point on, the remainder of the tower is residential, with a total of 37,953m² of residential floor space divided between a mix of studio to 3-bedroom units. Of the 629 total layouts there are 44 studios, 418 are single-bedrooms, 101 two-bedrooms, and 66 three-bedrooms, slightly bettering the City’s 10% minimum requirement for family-sized suites.

UrbanToronto will continue to follow progress on this development, but in the meantime, you can learn more about it from our Database file, linked below. If you’d like, you can join in on the conversation in the associated Project Forum thread or leave a comment in the space provided on this page.

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TAKOL, CMCC Buy Land to Develop GTA Industrial Condos

TAKOL Real Estate Inc. has specialized in selling industrial condominiums in the Greater Toronto Area (GTA) since its inception in 2015 and is now moving on to its first ground-up development.

To this point the private Canadian boutique commercial real estate investment and asset management company has largely been buying small bay, multi-tenant industrial buildings constructed in the 1970s and ’80s, converting their titles to condo, then selling individual units within the properties.

The bulk of TAKOL’s investment has been in Brampton and Mississauga based on decisions revolving around demographics, immigration and population growth.

“The growth of the GTA has been phenomenal and no one’s built small-bay industrial in almost 40 years,” TAKOL principal of investments Daniel Kolber told RENX.

“The supply-and-demand equation has skewed and we’ve seen tremendous growth in industrial rents in the GTA in the last five to eight years — effectively a tripling of rent.

“I think that tremendous growth in rents has driven a desire for people to own their own real estate. Why keep paying higher rents to a third-party landlord when you can pay yourself and hedge yourself against further rent inflation?”

Off-market acquisition in Milton

TAKOL and partner CMCC Capital Funds have acquired 19 acres of land in the Derry Green Corporate Business Park, a bit further west in Milton, for $27.7 million from a private vendor in an off-market deal.

The TAKOL/CMCC plan is to build 67 small-bay industrial condo units in a 420,000-square-foot development called Milton Gates Business Park.

It’s the same area where Oxford Properties just announced it has started construction on its massive, 3.3-million-square-foot James Snow Business Park, but the first phase of that project is focused on larger bay product.

Kolber believes that, had the TAKOL property been widely marketed, it could have sold for close to double the price. While the majority of TAKOL’s acquisitions have been made off-market, they’ve all been brokered through an agent.

“We’re deep-value investors in terms of our strategy, we’re not cap-rate buyers,” said Kolber. “We’re delivering very strong double-digit internal rates of return to our investors deal after deal after deal.

“We may not always be the highest bidder on a widely marketed deal and we’re fine with that. I’d rather not beat out 20 other people and say, ‘I paid more than 20 other people and I won this project.’ We’re not Blackstone.”

CMCC focuses on residential and commercial developments in major Canadian centres. Since 2011, it has formed five private real estate funds totalling in excess of $400 million in committed capital in addition to more than $100 million in parallel investments.

The company has generated consistent annualized returns of 18 to 25 per cent across more than 50 investments.

TAKOL and CMCC have partnered on a half-dozen deals and both thought working together on the Milton Gates Business Park development would be a good fit.

Milton Gates Business Park plans

The proposed Milton Gates Business Park development is going through the approvals process.

The municipality wanted small-bay industrial at the gateway site at the corner of Derry Road and Sixth Line, so it was a good fit for TAKOL’s 10-person team.

All approvals and permits should be in place next year and it’s hoped the first industrial condo units will be delivered in 2024.

Units will range in size from approximately 3,000 to 12,000 square feet, including a small office component, and those looking for more space can buy multiple units.

Marketing and sales will begin soon and pricing will be in the $450-per-square-foot range.

“There will be a base building condition and then if people want some further work we can do some fit-up on a case-by-case basis,” said Kolber. “But I suspect most buyers will want to do their own fit-up.”

TAKOL’s founders

Kolber is also the president and broker of record at TAKOL’s affiliate, KOLT, Keller Williams Real Estate Associates, Brokerage, the real estate brokerage that handles all of the company’s sales and leasing.

He’s also president of KOLT Management Inc., TAKOL’s affiliate property and condo management company.

TAKOL co-founder Takashi Yamashita, the Toronto-based company’s principal of development, has a diverse background as an architect (Smith Carter Architects and Engineers Incorporated), a private equity developer (The Rose Corporation) and a commercial real estate lender (GE Capital Real Estate).

Kolber said TAKOL considered getting into the residential condo market but has, at least for now, backed off due to rising construction costs, increased interest rates and supply chain issues.

Kolber has a background in retail real estate as the former vice-president of asset management for OneREIT.

He would like to find a value-add shopping plaza in which to invest, but the returns from small-bay industrial have been so good it will remain TAKOL’s near-term focus.

Looking ahead at TAKOL

The company is working on another off-market acquisition, this one for 25 acres in the western GTA, and is trying to tie up another half-dozen condo conversion sites with funds from earlier industrial condo sales.

“Between September and March, we’ve got about $100 million worth of condos that we’ve pre-sold that are getting registered and that will be closing,” said Kolber.

TAKOL has partnered with family offices, public companies and high-net-worth individuals, using a special purpose vehicle for each investment.

The appetite for more deals is strong at the moment and Kolber said the company is always looking to work with new investment partners, agents and brokers.

“We’ll always give people a quick yes or no. We don’t like dragging people along if we’re not serious on something. If people want to show us something, I hope they’ll reach out and see if we can do some business.”

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Oxford Building Phase 1 at $825M GTA Industrial Park

Oxford Properties has broken ground on the $825-million James Snow Business Park in the Greater Toronto Area town of Milton, where it plans to build a highly sustainable logistics hub of up to 3.3 million square feet.

The master-planned project is planned to contain 14 buildings and will be developed in phases at the 180-acre site. The initial phase now under construction comprises four buildings and about 1.55 million square feet of space, and is being built on spec.

Oxford has developed other industrial projects of this scale, but the firm’s head of industrial for North America, Jeff Miller, told RENX this is its first in the GTA.

“It’s very exciting. We’ve done a bunch of these across Canada and in the U.S. through our U.S. companies, so we are pretty excited to kick off a master-planned park in the Toronto area,” Miller said. “As we know it’s going to satisfy a huge need on the supply side; there really is a massive lack of real estate infrastructure right now.

“Toronto has got the lowest vacancy rate of major markets in North America . . . I think GTA just hit 0.3 per cent, not availability but just vacant. It is flat out nothing available.”

James Snow Business Park’s scale, flexibility

He said the scale of the James Snow Business Park also increases the flexibility of the types of product it can deliver for prospective tenants.

This phase, for example, includes state-of-the-art buildings ranging from about 75,000 square feet (two buildings) through 300,000 square feet and up to a million square feet of leasable space.

“We almost view these master-planned parks like an ecosystem where we can accommodate all kinds of different sizes and different types of industry and business for employers,” he explained.

“Over time they kind of interweave and work with each other, is the intent, if we have (unit) sizes from 15,000 square feet to over a million.

“To be able to create this product but to do it in a sustainable way is so important for us and increasingly important for our customers as well.”

Oxford builds in sustainability features

On the sustainability front, Oxford is incorporating solar power systems into the design of a spec project for the first time.

The four buildings include 400,000 square feet of solar photovoltaic arrays to provide 3.8 million kWh of renewable energy annually.

The James Snow park will target LEED certification and includes what Oxford calls “substantial work to preserve, restore and enhance the local natural heritage system.”

The design was created in collaboration with Denmark’s ak83 architects and local firm Glenn Piotrowski Architect.

“Advancing the sustainability initiative in industrial is a key priority for Oxford. We have historically on the construction side achieved LEED – it’s kind of the price of admission almost, where we are going to get base LEED environmental certification.

“The real question is how do you get beyond that. How do you install solar? Can we move to net-zero for industrial? So it’s been super important for us to incorporate this across the park.

“We are now going to incorporate the solar as part of the  base building infrastructure no different than the dock equipment, the lights and the roof. It is going to be part of the use building so our tenants will have clean energy from Day One.”

Two years of site preparation work

Oxford acquired the property about four years ago as a greenfield site in an area which was already designated by the town for future growth.

It’s part of the Derry Green Secondary Plan, Miller said, and Oxford then worked to take it through the various approvals and entitlements.

For the past two years, a massive amount of site work and preparation has been underway.

“We’ve had two years of infrastructure where we’ve had to build two roads, the pond, the greenspace,” Miller said. “We’ve imported a million cubic metres of fill, a hundred thousand truckloads of fill.”

The decision to move ahead on spec reflects the extended period of tight industrial availability across the GTA – currently well below one per cent – and what Oxford is hearing from its own existing tenants across the region.

Essentially, there is a strong belief demand will continue.

“We own eight million square feet in this market (essentially the Metro West submarket) and we know through our existing customer base the inherent demand that’s there,” Miller said, noting  inquiries from prospective tenants generally start once a building is actually being raised.

“We definitely have a strong belief that it’s there, and it’s going to continue to be there. And, it could actually be from our own portfolio.”

Tailwinds for light industrial sector

Despite some pullback in the e-commerce sector by companies such as Amazon (though much of that has been focused in the U.S.), Miller said there are many components to the light industrial boom.

“One of the things about industrial that I still believe in is just the huge variety and the breadth of companies that occupy facilities around an 800-million-square-foot market,” he said.

“There literally is every type of business under those roofs.”

Global instability and supply chain issues continue to be a factor as well. He said third-party logistics companies, needs- and tech-based firms and other light manufacturers are continuing to expand and consider on-shoring more of their operations.

Milton itself has seen a flurry of industrial land trades and development starts over the past year or two as demand has spilled over from the urban core areas.

Miller said there are several reasons for this.

“I’d say a combination of a couple of things. First of all it’s availability of land and it’s also the proximity to one of the largest markets in North America.

“It is really part of the fabric of industrial logistics,” he observed, noting that in the U.S., emerging light industrial hubs “can be an hour outside of the core. Milton is five minutes away. It’s not out there by any means.”

Oxford plans to deliver the four Phase 1 buildings during the latter part of 2023. At that point, Miller said, decisions will be made about the second phase.

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Madison Group’s Submitted Plans for a Two-Tower Mixed-Use Development on Eglinton East

Toronto’s ever-evolving Eglinton Avenue has become so familiar with construction and development in recent years that any breaking news in the sector has a tough assignment when it comes to standing out. Still development continues, like Madison Group’s recently submitted plans for a two-tower mixed-use development located at 110 Eglinton Avenue East, between Yonge Street and Mount Pleasant Road, with a plentiful gross floor space area (GFA) of 94,903m².

Designed by Turner Fleischer Architects, the towers sit atop a 9-storey mixed-use podium and soar to 59 and 57 storeys, reaching heights of 207 and 201m respectively. Interestingly, the entire development is defined visually by a prominent curved recession on the south elevation, reminiscent of a tuning fork, that hopes to strike a chord with prospective renters. But beyond the 1,116 new dwelling units the proposal offers, a wealth of retail and office space in the podium add another level of depth to the pending development.  

With applications for Official Plan Amendment (OPA), Zoning By-law Amendment (ZBA) and Site Plan Control submitted last month, the proposal hopes to be approved because of its alignment with the guidelines of different planning policies including the Yonge-Eglinton Secondary Plan. The case is supported by the site’s location within the Yonge-Eglinton Urban Growth Centre, which also meets the criteria of a major transportation station area, with Eglinton subway station within a 250m walk. 

The mostly rectangular site has a total area of 5,450m², with a 91m frontage along Eglinton Avenue East. Two buildings occupy the site currently: a 9-storey office building with retail at grade at 90 Eglinton Avenue East and a 7-storey mixed-use building with retail, commercial, and office space, at 110 Eglinton Avenue East. The proposal would see both buildings demolished in favour of a development that responds not only to the planned and existing context of the area, but also to the changing needs of an increasing population. 

The proposal intends to accommodate all the building’s non-residential programming in the 9-storey podium section while providing space on the ground level for two residential lobbies — one for each tower. The ground level would also be occupied by the office entrance and lobby, as well as two retail spaces, both with access from the Eglinton Avenue frontage. On the second level, the entire area of the 3342m² floor plate is reserved for retail purposes, while the subsequent levels 3-6 would house the entirety of the development’s office space in a similar layout. 

At the seventh level, the first residential units appear, along with a long and narrow outdoor amenity space in the form of a terrace stretching the width of the building’s northern border. Units at this level will also enjoy private terraces that wrap around the east, west, and south faces of the building. The subsequent levels are all residential, with a mix of one- to three-bedroom options amounting to 76,632m² of total residential floor space area. 

Another significant outdoor amenity space is found on the roof of the podium, on the 9th level, which also marks the beginning of the towers, bordering the east and west edges of the podium with a separation of roughly 15m between them. From that point on, the floor plan remains generally consistent, with the proposal’s 3,700m² of total amenity space already laid out below and no further stepbacks. 

As previously noted, the building’s massing is characterized by the curved recession that emerges at the base of the towers and extends up their entire southern elevations. Additionally, the massing of the structure changes significantly between the first and second storeys to effectively facilitate loading and back-of-house services in a non-disruptive manner. While the building takes on its full form at the second level, large cutouts appear on the north side of the site to accommodate a loading and staging area, and the ramp leading to underground parking. The ramp leads to three levels of underground garage space, with a total of 366 vehicle parking spaces and 1,242 bicycle spaces. 

UrbanToronto will continue to follow progress on this development, but in the meantime, you can learn more about it from our Database file, linked below. If you’d like, you can join in on the conversation in the associated Project Forum thread or leave a comment in the space provided on this page.

Source Urban Toronto. Click here to read a full story

Toronto Isn’t The Only Place That’s Growing in Southern Ontario: Urban Hamilton

Toronto isn’t the only place that’s growing in Southern Ontario… …and in fact, every city and town in the area seems to have a fair share of cranes these days. In this image by UrbanToronto Forum contributor Lachlan Holmes are two of the many projects rising around the Gore Park area in Downtown Hamilton; the Gore Park Lofts in the middle ground, and Cobalt Luxury Residences in the background.

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CRE Investment Outlook is Strong, But Less Capital Available

Despite ongoing economic uncertainty, Canada remains a good place to invest according to senior executives who closed the Sept. 8 RealREIT conference at the Metro Toronto Convention Centre with a panel discussion moderated by RioCan REIT(REI-UN-T) president and CEO Jonathan Gitlin.

Other Western countries are facing similar issues, but Europe also has concerns about an energy crisis resulting from the war in Ukraine. So, Canada still has plenty of appeal despite being a relatively small real estate market with limited opportunities.

“I think that Canada has a unique advantage of being one of the most investable countries on Planet Earth,” said Mark Kenney, president and CEO of CAPREIT (CAR-UN-T), which owns or has interests in approximately 67,000 residential apartment suites, townhomes and manufactured housing community sites across Canada and the Netherlands valued at approximately $18 billion.

“It’s a safe society. We have low environmental impact coast-to-coast. And from a real estate point of view, we’re really a country with three cities: Toronto, Vancouver and Montreal.”

Canada is a safe investment haven

Institutional investors from Canada and Europe have told Kenney they see the world’s second-largest country (by land area) as a safe haven.

“Long-term investment in Canada makes sense; however it could be bumpy for a little while,” said Slate Asset Management founding partner Blair Welch.

“The good news is that there is an enormous amount of capital available for investment,” said Adam Paul, president and CEO of First Capital REIT (FCR-UN-T), which has $10.2 billion of assets under management.

“And that capital has an increasingly higher bias towards alternative investments, like real estate, for its cash-flow characteristics and for its inflation-hedge characteristics.”

A number of non-Canadian entities are investing or laying the groundwork for investing in Canada, according to Paul.

“Canada is an increasingly more attractive place on a relative basis. We complain a lot about a lot of things, but our political stability is a positive factor globally.

“Our social status and quality of life that people afford in Canada is attractive along with the labour pool and the economic growth profile. So I think Canada, really since the the 2008 and 2009 downturn, has elevated its profile on the global stage.”

Disciplined lending environment

RBC Capital Markets managing director of global equity research Pammi Bir said Canada’s disciplined lending environment can also minimize or eliminate excesses that could create potential problems.

“As a foreigner coming in here, there’s not a lot of risk capital,” Welch added. “We have really smart real estate people and massive pension funds globally that dominate.

“It’s not like you can just waltz in here and do whatever you want. Canada is very, very protected because of our system.”

While Welch acknowledged Canada’s controlled capitalism can be protective during times of disruption, it can also limit some potential upside.

Kenney said Canada has a very sophisticated real estate environment that has helped major Canadian REITs and real estate operating companies export their platforms overseas, which their American counterparts haven’t done to nearly the same extent.

REITs trade at a discount to value

Paul pointed out that a basket of two dozen Canadian apartment and commercial REITs are trading at an average 23 per cent discount to their intrinsic value, while a year ago they traded at a five per cent premium to their intrinsic value.

“Public markets don’t respond in a calm fashion when you’re going through a period of change,” said Paul. “Public markets typically get the direction right but the magnitude wrong.”

Kenney said 70 per cent of CAPREIT’s capital stack comes from retail investors, many of whom are stressed, scared and aren’t thinking long-term.

Low share prices offer great opportunities for REITs to purchase their own stock for long-term gain and he thinks other investors should also take advantage.

One of Slate’s current investment strategies is buying global REITs at a discount to net asset value because you’re investing in their skilled management teams as well as their properties.

Welch said there’s very little capital available from lenders for large deals, but there is for smaller ones.

Granite REIT president and CEO Kevan Gorrie talks to institutional investors on a regular basis and said almost all have told him their capital allocations aren’t being impacted by current economic factors. While a lot of capital is on the sidelines now, he thinks it will return.

Granite (GRT-UN-T) owns 139 properties totalling 57.5 million square feet in Canada, the United States, Germany, the Netherlands and Austria.

Differing views on development

Welch said development took off because of the cheap cost of capital and, now that it’s becoming more expensive, Slate is being more selective.

He’d rather lend money or buy a REIT than develop and thinks he can now buy some assets without taking the time risk associated with development.

Industrial yields were very tight in 2021 so Granite decided to embark on an ambitious program to develop 5.5 million square feet. This requires capital expenditures without immediate returns from income, but it adds value for unit holders over the longer term.

Granite has been getting better yields than expected from development because rent growth has been greater than anticipated.

Last year presented a greater challenge for costs than this year because construction materials were harder to come by and container and shipping costs were higher, according to Gorrie.

“We’re in this period now where inflation is hitting us for sure, but cost pressures on the construction side have moderated.”

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REITs Still Upbeat on Canada’s Industrial Real Estate Sector

Despite an unprecedented amount of ongoing industrial facility development, continued strong demand has kept vacancy rates across Canada below two per cent.

A session at Sept. 8’s RealREITconference at the Metro Toronto Convention Centre, moderated by RBC Capital Markets Real Estate Group managing director David Tweedie, featured four executives discussing how recent events have impacted the asset class and their expectations for the future.

Tweedie opened the session with a presentation outlining the state of the market.

“From a fundamentals perspective, we’re sitting at record national-low availability, double-digit rental rate growth continues in most major markets and (there are) record tenant absorption levels,” Tweedie said. “But on the headwind side, we’re facing moderating GDP, elevated inflation, the potential risk of recession in 2023 and continuing rising interest rates.”

Canadian industrial market snapshot

Canada’s nine largest markets have an industrial availability rate of 1.6 per cent, which is down 70 basis points year-over-year and some markets have an availability rate of below one per cent.

Asking rents in the second quarter were 34 per cent higher than a year earlier and have doubled over the past five years.

The price per square foot for industrial space has risen by more than 30 per cent.

There were 37 million square feet of new industrial space delivered in the past year, while there were 44 million square feet of net absorption. An additional 41.6 million square feet is under construction and due to be delivered this year and in 2023 — and about 60 per cent of it is already leased.

There will be about 14 million square feet of industrial space delivered in the Greater Toronto Area (GTA) this year, but the vacancy rate will remain below one per cent.

There was also a record high in industrial transaction value last year and, while there’s been a slowdown in Q3 this year, it’s expected the 2022 total will be close to that of 2021.

Investors and lenders like industrial sector

National Bank Financial director of real estate equity research Matt Kornack, who covers the multiresidential and industrial asset classes, said investors are looking at industrial as the asset class with the most growth and smallest capital expenditures.

However, Kornack said investors are also looking at returns on a one-year basis even though real estate is a long-term business. That has hurt many REITs and caused them to trade at a discount to net asset value.

Kornack expects more targeted lending, with lenders gravitating toward industrial because of its strong fundamentals.

He noted Canada has lagged the U.S. in industrial rent growth trajectory, but he’s bullish about rents continuing to increase and capital continuing to flow into the asset class.

In light of rent growth, Kornack said tenants will need to come up with ways to use their space more efficiently.

Skyline Industrial REIT

Guelph-based and privately held Skyline Industrial REIT owns 57 properties totalling 8.75 million square feet in 33 communities in five provinces valued at $1.25 billion.

Skyline Industrial REIT was previously focused on smaller properties in secondary markets, but moved midway through last year to sell virtually all of its small-bay industrial properties.

It has sold about $450 million worth and is redeploying the capital into newer properties, including a recently announced 16-building, two-million-square-foot, $309.25-million portfolio in Calgary and Edmonton.

Skyline Industrial REIT president Mike Bonneveld said there are just two vacancies in his entire portfolio and the REIT has offers on both.

Bonneveld noted tenants have become more educated and aware of rising rents. Some of the sticker shock has evaporated when they’re faced with doubled or tripled rents upon renewal and there’s nowhere else to go due to a supply shortage.

Skyline Industrial REIT is partnering with other developers, including on a 20-acre parcel of land in Halifax that marks its first foray into the Maritimes, as well as a deal with Montreal-based Rosefellow.

That second partnership includes a 325,777-square-foot, state-of-the-art facility at 151 Reverchon Ave. in the Montreal suburb of Pointe-Claire.

“We’ve just, as of last week, closed on our second fund with them,” Bonneveld said of Rosefellow. “We’ve got about 11 projects underway, with the majority in the GMA (Greater Montreal Area), that will deliver about three million square feet by the time we’re done.”

Some of Skyline Industrial REIT’s developments have been completely pre-leased before construction has started and tenants are committing to buildings that won’t be ready until Q3 or Q4 2023.

“The reason we’re in development is to get the pipeline of assets,” said Bonneveld. “We’re not doing it to build and flip. We’re in it to get very good product in the core markets we want to be in.”

One area of concern is getting product out of industrial properties, as more truck drivers and trucking facilities are needed.

Bonneveld said Skyline Industrial REIT bought a trucking facility as a land development play a year-and-a-half ago and saw its rents triple and its value significantly increase, so it no longer plans to redevelop the site.

PROREIT

Industrial space comprises about 80 per cent of Montreal-based PROREIT’s (PRV-UN-T) gross leasable area.

It owns about seven million square feet across Canada valued at approximately $1 billion. Its stock price is trading at about 28 per cent below net asset value, according to Mark O’Brien, PROREIT’s senior vice-president of leasing, operations and sustainability.

PROREIT was very active on the industrial acquisition front late in 2021.

It created a joint venture with Crestpoint Real Estate Investments Ltd. involving $455 million of mainly industrial properties, including a $228-million portfolio in Halifax’s Burnside Industrial Park, in June.

PROREIT and Crestpoint jointly own a portfolio of 42 properties, 41 in Halifax and one in Moncton, N.B., comprising nearly 3.1 million square feet of gross leasable area. O’Brien said they’ve taken rents from $8 to $12 and potentially $16 in Halifax.

O’Brien said there’s been no slowdown in leasing in any of the markets PROREIT is in and leasing spreads have been accelerating.

While PROREIT is looking at development opportunities as they come along, O’Brien said it’s primarily focused on earning good yields from stabilized assets in secondary markets as development yields compress.

Dream Industrial REIT

Dream Industrial REIT (DIR-UN-T) has about $6.5 billion in assets under management in Canada, Europe and the U.S. It has about three million square feet of space in its development pipeline.

Chief operating officer Alexander Sannikov said Dream Industrial’s priority is to grow the portfolio across geographies and it’s increasingly focused on speculative development. It prefers mid-sized projects over mega-projects.

Dream Industrial continues to sign lease deals in Canada and demand remains high. The REIT is pursuing acquisitions and is interested in strategic joint ventures.

Demand is also strong in Europe, where Dream Industrial signed two large-lease deals in the traditionally very slow month of August. It also had five tenants competing for an industrial development in Germany.

Sannikov said the European industrial market is dominated by merchant developers, whereas there are more build-to-hold developers in Canada.

He thinks returns are currently strongest in development and Dream Industrial can receive significant yield premiums.

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

CRE Measures Up as Canadian Economic Driver

Commercial real estate (CRE) is a Canadian economic driver on par with the oil and gas industry, economic analysts conclude. A new report, commissioned by the NAIOP Research Foundation, estimates CRE made a $148.4 billion total contribution to Canada’s gross domestic product (GDP) last year when factoring its direct, indirect and induced impacts, beginning with $78.2 billion of direct GDP output and nearly 373,000 equivalent fulltime jobs within the industry.

That’s derived from six envelopes of economic activity: construction and capital investment in each of the office, industrial, retail and multifamily asset classes; property management and operations within existing CRE inventory; and commercial brokerage services tied to leasing and asset transactions. Researchers with Altus Group Economic Consulting also considered how social and economic trends might affect each of those elements of CRE’s multifaceted whole.

“The commercial real estate sector could be vulnerable to long-term impacts related to the (COVID-19) pandemic such as the demand for office space that will continue to evolve with hybrid work practices and the demand for retail and industrial space that will continue to evolve with shifts in e-commerce trends. High inflation and rising interest rates have also increased costs for new commercial real estate development,” the report notes. “Notwithstanding these risks, non-residential investment is generally holding up and leasing activity related to new buildings is robust.”

Among the CRE asset classes, industrial and multifamily are the predominant economic engines, together accounting for 68 per cent of direct investment in new construction and about 55 per cent of direct investment in renovations and retrofits. On the job front, that translates into 60 per cent of the person years of employment that construction supported in 2021.

More than $16 billion invested in industrial construction last year continued a five-year growth trend in the sector and created 60,630 direct jobs. On the transaction side of the equation, about $16.7 billion worth of deals was a 92 per cent year-over-year increase and accounted for more than 37 per cent of CRE sales value in 2021.

Even more investment went into multifamily construction — exceeding $24 billion — representing 37 per cent of construction spending for the year and directly employing 90,760 workers. Investors also acquired about $13.2 billion worth of multifamily apartments, equating to more than 29 per cent of CRE sales value for the year.

Adding in $12.8 billion in the office sector and nearly $11.8 billion in the retail/hospitality sector, new construction and renovation/retrofit spending surpassed $65 billion in 2021. That was weighted about 55 per cent in favour of new construction, but office stands out for a greater share of renovation/retrofit activity occurring within existing inventory — equating to more than $8 billion in investment.

“Office construction is highly skewed toward renovation/retrofit because of the important contribution of tenant improvements,” the reports states. “The proportion of investment in new buildings has gradually increased since 2018, but will likely subside in the next few years. Post-pandemic trends may decrease the need for new office space at the same time as many office users find that adapting their spaces to emerging new working realities requires capital investment.”

That plays out in job numbers with 29,890 tied to office renovations and retrofits last year versus 17,590 in new office construction. In contrast, new construction generated nearly 115,000 jobs across the three other asset class compared to 80,000 related to renovations and retrofits.

Commercial brokerages enjoyed a 20 per cent year-over-year lift in fee collection last year. Nearly $9.5 billion in earnings — up from $7.9 billion in 2020 — also marked a five-year high. Fees hovered in the $8.1 billion range in 2018 and 2019 and tallied about $7.3 billion in 2017.

“Broker fees are typically generated based on transaction volumes, and the rise in broker fees in 2021 is related to the strong recovery in the number of transactions,” the report advises. That was seen in a 67 per cent year-over-year increase in total sales value, which rose from $26.5 billion in 2020 to $44.5 billion in 2021. Meanwhile, brokerage operations accounted for 48,670 jobs last year.

Management and operations of the existing inventory encompasses the multidisciplinary tracks of property and asset management, involving building operations, finance and investment and tenant-facing pursuits. It is proportionally the biggest spender among the six categories of CRE activity, supports the most employees and makes the heftiest contribution to GDP, which represents the final value of goods produced and services rendered. For 2021, that’s about $72.3 billion in direct spending, $46.3 billion in direct GDP and 81,580 direct jobs.

Compared to construction or brokerage services, property and asset management have a disproportionately positive influence on employment in other sectors from which products and services are procured. That’s estimated at 219,430 indirect jobs — a multiplier effect of nearly 2.7 — representing slightly more than half of all indirect employment attributed to the CRE industry. That flows through to $13.58 billion in indirect labour earnings and nearly $21.5 billion in indirect GDP.

Property/asset management actually spurred better paying indirect jobs, at an average of $61,887 per worker, than within the CRE sector. Looking at direct jobs, average per worker earnings in 2021 were $79,600 in construction/renovation versus $56,877 in management and operations.

CRE construction generated roughly 181,000 indirect jobs or 75 per cent the amount of direct jobs. That represents $12.94 billion in labour earnings or an average of $71,484 per worker.

Source REMINetwork. Click here to read a full story

CentreCourt and Spotlight Propose 60 Storeys at Church and Queen

CentreCourt and Spotlight Development are jointly seeking to redevelop a plot in the Old Town area of Downtown Toronto at 85 through 89 Queen Street East and 119 through 127 Church Street (known as the longtime flagship store for Canadian camera chain Henry’s). Zoning By-law Amendment and Site Plan Approval applications submitted by Bousfields Inc for a 60-storey, mixed-use building designed by IBI Group with GBCA Architects handling heritage aspects. The redevelopment would provide the neighbourhood with 583m² of ground floor retail, 17 residential rental replacement units, and 701 condominium units totalling 44,354m² if approved.

Located at the southeast corner of Queen Street East and Church Street, the rectangular 1,594m² plot comprises five low-rise buildings at 119, 121, 123, 125 and 127 Church Street, and 85 through 89 Queen Street East. Ranging from 2 to 4 storeys in height, these brick-built buildings that date as far back as the 1840s have been the subject of numerous alterations to accommodate their current commercial and residential rental uses, with enough change that none of the above properties are listed on the Heritage Register.

The plot is sited along the Church Street corridor in Downtown Toronto and is only 300m east of Yonge Line 1 at Queen Station, which will eventually also be served by Ontario Line 3 running from Exhibition Place through to the Ontario Science Centre. The site is also 500m northeast of King Station, and about that distance from the future Ontario Line 3 station at Moss Park to the east. This site, therefore, falls within the definition of a “Major Transit Station Area” as per the Province’s Growth Plan, making it a prime candidate for redevelopment.

IBI Group have consciously panelized and incorporated the existing brickwork elevations of 89 Queen Street East and 119-123 Church Street into a proposed seven-storey base podium. By recessing the contemporary massing from the historic facades, the architects have been able to preserve the form of some of the original buildings and maintain a somewhat homogenous street frontage.

125-127 Church Street at the Queen and Church intersection would be demolished and replaced with a contemporary clad form that rises to 198.15m. A setback of approximately 2.5m from the northern and western property lines would provide visual relief from the reconstituted facades. The tower element that begins at level 8 is aligned with the outer faces of the newly added podium below. A 10m setback from the centre line of Ditty Lane to the south helps limit shadow impacts on nearby properties and the public realm.

The proposed façade incorporates a combination of three unspecified cladding typologies and extensive clear glazing that are in keeping with the existing and approved high-rise buildings within the east Downtown area. Notably, the northern and southern elevations of the development disrupt the homogenous grid pattern that IBI Group have implemented with a series of chamfered cladding elements that add dynamism to the design as it rises vertically.

The development includes 17 rental replacement units and 701 new condominium units, found at level 4 upwards. The condominium units are comprised of 500 one-bedrooms (71%), 131 two-bedrooms (19%), and 70 three-bedrooms (10%), representing a residential Gross Floor Area of 44,354m². Level two accounts for most of the scheme’s 1804m² of indoor and outdoor amenity space. The limited visitor and accessible vehicle parking spaces are accessed via Ditty Lane to the south of the property line, which leads east off Church Street. A single underground level provides the development with ancillary spaces and 701 bicycle parking spaces that the building requires. A proposed Gross Floor Area of 44,937m² that is inclusive of 583m² of retail space at ground level that predominantly fronts Queen Street East, would give the site a density of 28.2 FSI.

UrbanToronto will continue to follow progress on this development, but in the meantime, you can learn more about it from our Database file, linked below. If you’d like, you can join in on the conversation in the associated Project Forum thread or leave a comment in the space provided on this page.

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EDITOR’S NOTE: An earlier version of this story erroneously omitted Spotlight Development Inc. as co-developer of the proposal.

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UrbanToronto’s new data research service, UrbanToronto Pro, offers comprehensive information on construction projects in the Greater Toronto Area—from proposal right through to completion stages. In addition, our subscription newsletter, New Development Insider, drops in your mailbox daily to help you track projects through the planning process.

Source Urban Toronto. Click here to read a full story