Tenant Demand Is 141 Times More Than What Is Available in the Toronto-Hamilton Area
Tenant Demand Is 141 Times More Than What Is Available in the Toronto-Hamilton Area
There is virtually no lab space available in the Greater Toronto and Hamilton Area, according to a new report that suggests tenant demand is 141 times higher than what’s available on the market.
Real estate company CBRE said in its inaugural lab report on Canada’s largest market that “ballooning demand” for space is attracting growing investor interest.
“In the past, a lack of investor participation in the GTHA lab real estate market had forced most tenants to use their own capital in order to expand their footprints in the region. This has resulted in an undersupplied market that is facing growing demand from both tenants and investors,” said CBRE in a 23-page report that identifies the lab vacancy rate in GTHA at 0.2% with 12.3 million square feet.
The real estate company said outside of the MaRS Discovery District in downtown Toronto and the McMaster Innovation Park campus in Hamilton, multitenant lab properties are scarce and account for only 2.3% of total inventory.
The real estate company said lab inventory in the GTHA is concentrated in smaller facilities, which limits the ability for tenants to expand.
“Most of the lab spaces in the GTHA are single-tenant properties, totalling 9.1 million square feet and representing 73.7% of the total inventory,” said CBRE, noting the MaRS site is 2.3 million square feet and McMaster is 700,000 square feet.
“The predominance of single tenant lab inventory in the GTHA is the result of a lack of investor participation in the lab real estate market in Ontario,” CBRE said.
CBRE said occupiers have been forced to buy or build their facilities but lack the upfront capital and are not willing to wait for years before occupying the space. Therefore, they are compelled to look at U.S. markets for available space.
The real estate company said that as of the first half of 2022, there was 3.5 million square feet of demand for lab space in the GTHA, with 1.9 million square feet for research and development and 1.4 million square feet for what is called good manufacturing practices or biomanufacturing facilities.
CBRE said the construction costs vary based on facilities’ demands, but interior fit-out costs can range from between $100 and $600 per square foot for the core and shell and between $100 and $850 per square foot for the interior fit-out.
The real estate company said there are three notable lab buildings in GTHA that are expected to be completed in 2023: the 120,000-square-foot OmniaBio B project at McMaster Innovation Park, the 160,000-square-foot Sheridan Innovation Centre in Mississauga and a confidential 119,000-square-foot facility in downtown Toronto.
“Combined with the success and growth of the lab sector seen in the U.S., investor demand has also grown as they come to better understand the nuances and associated costs with building and leasing highly sophisticated lab space,” said CBRE in the report.
Source CoStar. Click here to read a full story
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