3 Canadian Industrial Properties You Can Buy For Less Than $10 Million
As we enter 2023, it appears the Canadian industrial market is continuing to outperform most other asset classes across the country. With average vacancy sitting at 1.5% nationwide and rent growth at just over 14% year-over-year as of Q3 2022, according to CoStar, the publisher of LoopNet, it’s no wonder investors continue to show a sustained appetite for industrial properties, despite the ongoing rise in interest rates.
However, that strong investment demand, combined with a shortage of product, is leading to record-high pricing, with the average market sale price for industrial properties across Canada at 280 Canadian dollars (US$208) per square foot, according to CoStar. Core properties and those offering land rights and/or redevelopment opportunities are often the most expensive, but even value-add and opportunistic deals are pricing higher than the historical average.
As a result of this increase in prices, capitalization rates are compressing across the country. Combined with high interest rates, this sometimes leads to negative spreads in many major markets. Yet sales activity continues unabated, reflecting expectations for strong rent growth that will outpace inflation.
The three properties listed below offer a portrait of what the industrial market currently has to offer across the country. From fully-leased core investment assets to vacant properties ideal for owner-occupiers or developers, or somewhere in between, these listings will help give you an idea of what $10 million can get you in industrial today.
Montreal’s Rive Sud submarket is currently seeing some of the strongest rent growth in the country at 24.8% year-over-year as of Q3 2022, according to CoStar data, making it particularly attractive to potential investors.
This 28,650-square-foot flex building on 2.07 acres of land just off Highway 30 features an 80/20 warehouse-to-office ratio. Built in 2006 and renovated in 2011, it has five dock and two grade-level doors, 24.5-foot warehouse clearance and an overhead crane situated 11.5 feet above the poured concrete slab floor.
“The marketing is a bit different than usual,” said listing broker Mathieu Tessier in an interview with LoopNet. “It’s an ideal asset for either an investor or for an owner-occupier, depending on whether the tenant exercises their renewal option. If the tenant renews, it will become an asset for an investor or a REIT that will buy it purely for revenue.”
Given that the tenant, ABB Ltd., is in the final year of a 10-year lease that ends in 2024, Tessier explained that the current rent paid on the property is considerably lower than market rates. However, he cited a recent Montreal industrial market report by Colliers indicating an average net rent of CA$20.50 per square foot as of Q4 2022 for the Saint-Hubert neighborhood where the property is located.
The property’s surrounding land also offers possible added value, Tessier said. “It can be either land for use by the business or for a potential expansion,” he said.
This recently vacated, two-floor, 10,000-square-foot building is located in Vancouver’s emerging Railtown neighbourhood, just minutes from the downtown core.
“It’s a great little property with good value in an emerging area,” said listing broker Marc Saul, principal at Corbel Commercial, in an interview with LoopNet. “I think it’s a strategic building for anyone who’s in creative products manufacturing. The area is a real hotbed for businesses like that.”
Notable neighbours in Railtown include the corporate headquarters of well-known apparel brands like Aritzia and Herschel, as well as flagship retail locations for BOCCI Glass Shop, Park & Fifth and the soon-to-open Haven Apparel, among others.
Built in 1948, the building's frontage is set back from Railway street, allowing for multiple parking spaces and easy access to three covered dock-level loading bays. Besides apparel and creative manufacturing, other potential uses include light industrial, digital entertainment and technology, Saul said.
Although it is being positioned as ideal for an owner-occupier, potential investors could also generate significant upside from leasing out the space at market rates or from redeveloping or repositioning the asset. Under Vancouver’s density guidelines, the property is buildable up to a 5.00 floor space ratio (FSR), meaning a total of about 31,000 square feet of gross leasable area. The current asking rent is $22.50 net per square foot.
“It’s an opportunity to acquire a freestanding 10,000-square-foot building that’s priced similarly — if not even a bit cheaper — than a brand-new similarly-sized strata unit,” Saul said. “So, I think there’s good value there.”
Located in the Northeast Ontario submarket, Cornwall sits beside Highway 401 linking Toronto and Montreal, and is often sought after by logistics companies wishing to serve both markets, as well as nearby Ottawa. It also features the Seaway International Bridge connecting Canada and the United States, making it a key international transport hub.
“[Tenants] are looking for economical options outside the major cities where the rates are incredibly high,” said listing broker Steve Piercey, vice president, advisory and transaction services at CBRE, in an interview with LoopNet. “So, anything along the 401 is a major draw.”
Coming in at a $9,000,000 asking price, or $125 per square foot, this 71,880-square-foot, free-standing, single-floor warehouse was built in 1973 and sits on 3.81 acres of land. It is currently fully leased to UAP Recycling on a 5-year term expiring in April of 2027, offering cash flow security and stability to a potential investor.
The property features eight dock and four grade-level doors, as well as ample on-site parking. The warehouse ceiling height ranges from 15.7 to 20.2 feet, with no columns in most spaces and refrigeration equipment available for use in multiple sections of the warehouse.
“It’s a single-tenant industrial building — perfect for a small investor acquisition,” Piercey said. “The equipment is all there, ready to go.”
While the seller is only releasing income information after a confidentiality agreement has been signed, CoStar data indicates average industrial market rent for the Northeast Ontario submarket sits at $8.40 per square foot, with rent growth at 11.5% year-over-year as of Q3 2022.