Industrial Each of the Canadian industrial markets experience demand to finish off 2017 - JLL
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Industrial Canada | Q4 2017 Each of the Canadian industrial markets experience demand to finish off 2017 JLL Research
Overview
2 Industrial Outlook | Canada | Q4 2017
JLL’s logistics and industrial services
From manufacturing plants to around-the-clock Our experts know all of the issues that impact your
distribution centers, industrial real estate is the backbone industrial real estate decisions and apply proven best
of the global economy. Today’s financial and competitive practices to address such challenges as skyrocketing
pressures demand that your industrial property—whether energy, transportation, and labor costs; heightened
leased or owned—delivers maximum flexibility and security needs; tough new environmental requirements;
efficiency. Our logistics and industrial professionals and profound changes in global supply chains. Because of
understand the current business environment and offer our depth of in-house talent, we can quickly assemble just
innovative, profitable strategies for supply chain the right team for your particular need. Regardless of the
optimization, site selection, sales, leasing, acquisition, size and scope of the assignment, you will have a single
financing, construction, project management, and point of contact who manages all service delivery and is
property and facility management of industrial properties responsible for producing the measurable results that are
and portfolios. agreed to up front.
Canada industrial property clock 3
Local Markets
Metro Vancouver 5
Calgary & Area 6
Greater Edmonton Area 7
Greater Toronto Area 8
Greater Montréal Area 9
Greater Montréal Area (French) 10
About JLL 11
More than 300+ JLL professionals cover the top 50 industrial markets in the United States and 700 more are at work in major
industrial markets around the globe.
In 2016, JLL logistics and industrial services completed more than 3,536 transactions comprising over 251 million square feet of
space at a value of more than $9.0 billion.
3 Industrial Outlook | Canada | Q4 2017
Canada industrial property clock
The JLL industrial property clock illustrates where each
market sits within its real estate cycle. Markets generally
move clockwise around the dial, with those markets on the
left side generally facing more landlord-favorable
environments, whereas those on the right experience
generally tenant-favorable conditions.
Toronto
Canada Peaking market Falling market
Vancouver
Calgary
Rising market Bottoming market
Montréal
Edmonton
Source: JLL Research
Canada
local markets
4
Metro Vancouver
The narrative for the Metro Vancouver industrial market
in 2017 is one of demand
• Metro Vancouver’s vacancy rate declined for the second straight quarter, Fundamentals Forecast
highlighting the strong demand for warehouse space throughout the YTD net absorption 1,628,656 s.f. ▲
market QTR net absorption 772,472 s.f. ▲
• This quarter experienced a high volume (5,316,556 square feet) of Under construction 5,316,556 s.f. ▲
speculative and built-to-suit space under construction
Total vacancy 2.1% ▼
• The Burnaby submarket experienced a large jump (11.1 percent) in its’
Average asking rent (Net) $10.05 p.s.f. ▲
average asking net rent quarter-over-quarter
Tenant improvements Stable ▶
The narrative for the Metro Vancouver industrial market in 2017 is one of
demand. Each quarter in 2017 experienced positive net absorption, and the Supply and demand (s.f.) Net absorption
Deliveries
vacancy rate remained below 2.4 percent throughout. A healthy provincial 3,000,000
economy has facilitated this demand, by putting companies in a position to
2,000,000
expand within the industrial market or enter it for the first time. Could this
narrative continue into 2018? Yes, it could. RBC's economic outlook for the
1,000,000
new year forecasts that GDP will grow by 2.2 percent, albeit lower than the
average of 3.5 percent in the previous four years. This growth should continue 0
to fuel demand for warehouse space. Q3 Q4 Q1 Q2 Q3 Q4
2016 2016 2017 2017 2017 2017
How is this demand shaping the industrial market? In one very noticeable
way. Because of the apparent lack of available space within the industrial Total vacancy
market, developers are rapidly adding to the amount of space under
construction, to take advantage of the demand. In the past two years, the 2.0%
2.2% 2.3% 2.2% 2.1%
amount of space under construction never surpassed 5 million square feet; 1.5%
but in Q4 2017, there is 5,316,556 square feet under construction. With the
high volume of space under construction, we expect to see tenants related to
the construction and building material industry to exhibit a strong demand for
space. In Q4 2017, 1/3rd of the top lease deals were completed by this tenant
type for example. Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
Outlook
Average asking rents ($/s.f.) Net Rent
The Bank of Canada hiked the overnight rate to 1.25 percent on January 17, Additional
2018. Because of this, we think that the Metro Vancouver industrial market will $12.00
be impacted in the following way: with a higher cost to borrow money, more $9.00
buyers in the market will be put in a position where they have to lease space
$6.00
instead of purchasing it. And because of this increased demand to lease
space, landlords will be in a position to increase average asking net rents, $3.00
therefore they likely will. $0.00
Q3 Q4 Q1 Q2 Q3 Q4
For more information, contact: Ben Wedge | ben.wedge@am.jll.com 2016 2016 2017 2017 2017 2017
© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Calgary & Area
Year end numbers show an increase in net absorption
while vacancy continues to fall
• There continues to be momentum in the industrial market which has Fundamentals Forecast
fueled positive net absorption for four consecutive quarters YTD Net Absorption 1,775,992 s.f. ▲
• The vacancy rate dropped 110 basis points year-over-year QTR Net Absorption 627,325 s.f. ▲
• New space delivered to the market increased by 258,732 square feet ▲
Under Construction 531,175 s.f.
as developers are responding to the uptick in demand
Total Vacancy 6.7% ▼
Average Asking Rent (Net) $9.45 p.s.f. ▶
2017 concluded with the Calgary & Area (C&A) industrial market posting positive
net absorption along with a vacancy rate that decreased for a fourth
Tenant Improvements Increasing ▲
consecutive quarter. Compared to 2016, which saw two quarters of negative net
absorption and increasing vacancy rates, 2017 market activity showed greater Supply and Demand (s.f.) Net absorption
Deliveries
signs of recovery. The largest decrease in vacancy occurred in the Southeast 1,000,000
quadrant, where vacancy fell from 6.0 percent to 5.4 percent. A driving force for
500,000
this decrease was multiple transactions ranging from 30,000 to 100,000 square
feet. Vacancy in the South-central increased from 4.8 percent to 5.4 percent and
0
remained stable in the Northeast at 10.1 percent.
-500,000
Net absorption was highest in the Northeast quadrant, totaling 689,332 square Q3 Q4 Q1 Q2 Q3 Q4
feet. New space delivered to the market in Q4 totaled 316,843 square feet, this 2016 2016 2017 2017 2017 2017
represents an increase of 258,732 square feet quarter-over-quarter. It is
expected that Balzac will be an active submarket for development and leasing Total Vacancy
7.8% 7.8%
through 2018, in part because of Amazon’s announcement of a 600,000 square 7.6%
foot distribution center at Nose Creek Business Park and the announcement of
7.1%
several larger speculative developments to be brought to market later in 2018. 6.8% 6.7%
Notable projects including Bentall Kennedy’s 418,346 square foot warehouse in
the High Plains Industrial Park and One Properties 607,200 square foot
development at StoneGate Industrial.
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
Outlook
Leasing activity in the C&A industrial market continued to trend upward
through Q4 2017. And with economic conditions improving in Alberta, we Average Asking Rents ($/s.f.) Asking Rate
TMI
expect that leasing activity will remain consistent moving into 2018 as well.
$10.00
What impact will this have on the market? We expect that construction levels
$8.00
should increase. And where will this increase in construction happen? Within
$6.00
the Northeast and Northeast Outlying submarkets, where new speculative
$4.00
developments continue to be announced. Therefore, expect to see more
$2.00
activity in each of these submarkets.
$0.00
Q3 Q4 Q1 Q2 Q3 Q4
2016 2016 2017 2017 2017 2017
For more information, contact: Bryon Leece | bryon.leece@am.jll.com
© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Greater
Q3 2017
Edmonton Area
Industrial Insight
Fueled by growth in the energy sector, the Edmonton
industrial market sees improved activity
Fundamentals Forecast
• Average asking rates increase from $9.16 per square foot in Q3 2017 to YTD net absorption (584,601) s.f. ▲
$9.43 per square foot in Q4 2017 QTR net absorption 387,407 s.f. ▲
• Tenants take advantage of current market conditions, leading to positive Under construction 2,340,211 s.f. ▲
net absorption in the Greater Edmonton Area (GEA) Total vacancy 6.2% ▶
• The Nisku/Leduc and SE submarkets lead the GEA in leasing activity Average asking rent (Net) $9.43 p.s.f. ▲
Tenant improvements Steady ▶
The theme for the past two years in Edmonton has been regarding the energy
crisis and the resulting impact that it has had on the industrial market. Due to Supply and demand (s.f.) Net absorption
Deliveries
the concentration of energy-related companies that occupy space in the GEA, 5,000,000
the crash of oil prices led to a significant dip in leasing activity that persisted
3,000,000
throughout 2016 and 2017. Nearing the end of Q3 this year, we began to
experience improvements in activity in the SE submarket which carried over
1,000,000
into Q4. The Nisku and Leduc submarket has considerably improved in
demand and leasing activity this past quarter, after having been the most -1,000,000
impacted submarket by the energy crisis. 2014 2015 2016 2017
Tenants have been more proactive, entering the market while net asking rent
and incentives remain favorable. While activity has improved, the large
Total vacancy
quantity of space available on the market has allowed tenants to be particular
about the ultimate space they choose to occupy. This has driven most of the
demand towards properties that are of higher quality with easy accessibility. 6.2%
5.0%
The improved demand has driven average asking net rent higher for the first 4.1%
time in eight quarters, from $9.16 per square foot in Q3 2017 to $9.43 per 1.4%
square foot in Q4 2017. Net absorption has continued to be positive for the
second straight quarter, and the development of a number of owner-user
properties has contributed to an increase in industrial space under 2014 2015 2016 2017
construction in the GEA.
Average asking rents ($/s.f.) Net Rent
Outlook Additional
Improvements in Alberta's energy and manufacturing sectors have led to a $12.00
more optimistic outlook on the province's economy, which has been reflected
$9.00
in the industrial market in Edmonton. While a recovery in the industrial
market is not yet guaranteed, the gradual improvements that we've $6.00
experienced in demand and activity are a positive factor towards returning to
$3.00
pre-oil crash levels.
$0.00
For more information, contact: Anmole Rai| anmole.rai@am.jll.com 2014 2015 2016 2017
© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Greater Toronto
Area
Despite surge in new speculative construction mid-size
space is almost non-existent
• The total vacancy rate ended the year at 2.8 percent, a 70 basis point Fundamentals Forecast
increase year-over year, primarily due to the increase in speculative YTD net absorption 5,436,443 s.f ▲
construction QTR net absorption 1,935,180 s.f. ▲
• Net absorption of 1.9 million square feet in the fourth quarter and 5.4 Under construction 3,074,165 s.f ▲
million square feet for the year illustrate continued demand
Total vacancy 2.8 % ▶
• Landlord favourable conditions keep average asking net rents trending
Average asking rent $6.22 p.s.f. ▲
upward
Tenant improvements Decreasing ▼
In response to the amount of tenant demand being experienced in the Greater
Toronto Area (GTA) and a lack of available warehouse space, developers Supply and demand (s.f.) New Supply
Net absorption
continue to actively build. This response has meant 8.8 million square feet of 13,000,000
new supply being delivered in 2017 of which 5.6 million was speculative.
10,000,000
Comparing this to 2016 new supply – when 5.6 million square feet was delivered
of which 4.3 million square feet was speculative - this is quite high. The increase 7,000,000
in new supply has impacted the industrial market by increasing the vacancy
4,000,000
rate, although only marginally.
1,000,000
Tenants in the industrial market have had a healthy appetite for big box space 2014 2015 2016 2017
over the past year. This has caused average asking net rents for big box space
to trend upward, and has prompted developers to focus on building additional
Total vacancy
big box space to meet the demand. Orlando is nearing completion on a 303,000
square foot build-to-suit for Expeditor at 6360 Belgrave Road, Mississauga. 4.5% 4.0%
While Wayfair, an e-commerce company, signed the largest lease of the quarter
3.5% 3.0%
when they took Panattoni’s new 770,000 square foot building at 2020 Logistics 2.8%
Drive, Mississauga. But because of this focused big box development, 2.5% 2.1%
availability for mid-range product (50,000 to 90,000 square feet) is in short
supply, with Class A availability in that size range being practically non-existent. 1.5%
Because of a lack of space in this size range, market savvy tenants are now 2014 2015 2016 2017
negotiating leases even earlier and opting to do lease renewals instead of
acting upon RFPs - such as Pepsico, Nestlé and Best Buy. Average asking rents ($/s.f.)
$6.20
Outlook
Over the next 24 months, developers are aiming to get started on new business $6.00
parks in Brampton, Caledon, Milton and Vaughan that will add much needed $5.80
supply to the market. Over the next 12 to 24 months, rental growth will be $5.60
above historical norms as the new supply should temper rental growth to 3 to 5
percent. $5.40
2014 2015 2016 2017
For more information, contact: John Scioli | John.Scioili@am.jll.com
© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.Greater
Q2 2017 Montréal Area
Industrial Insight
Can rents climb even higher? We think they will in 2018
• Average asking rents reach a new milestone by becoming the highest Fundamentals Forecast
they have been in the markets history YTD net absorption 4,305,936 s.f. ▼
• Speculative construction continues to rise, particularly in Saint-Laurent, QTR net absorption 2,388,663 s.f. ▼
where there is 217,000 square feet under construction Under construction 2,291,180 s.f. ▲
• Molson-Coors announces a huge project Total vacancy 4.9 % ▼
Average asking rent (Net) $6.03 p.s.f. ▲
Just when we thought the Greater Montréal Area’s (GMA) industrial market Tenant improvements Falling ▼
couldn’t tighten up more than it already has…it did. Net absorption for the
quarter was just under 2.4 million square feet, bringing the total net Supply and demand (s.f.) Net absorption
Deliveries
absorption for 2017 in at a whopping 4.3 million square feet. In turn, total 5,000,000
vacancy has been pushed down under the 5 percent mark and average asking
rents have surpassed the $6.00 per square foot mark. The fourth quarter saw
many big box deals being done throughout the GMA. The biggest one to note 0
is XTL’s 330,000 square foot built-to-suit project at 9135 Henri-Bourassa Est in
the East End. Their old site in Dorval is no longer functional due to the
-5,000,000
expropriation of the rail line for the new LRT system, which was used to
2013 2014 2015 2016 YTD
transport goods in and out. 2017
Sale activity slowed down this quarter, mostly because there is less and less
supply for sale on the market. As the sale market continues to tighten up, Total vacancy
we’re starting to witness large, off-market transactions. For example,
Dollarama purchased 8475-8499 Place Devonshire for $18 million (121,320 6.3% 6.5% 6.1% 5.8%
4.9%
square feet) & Vista sold a portion of their site in Varennes to PDI Bulk for
$11.25 million (the other portion of the land is being utilized for Costco’s new
distribution center).
There is currently just under 2.3 million square feet under construction in the 2013 2014 2015 2016 YTD 2017
GMA. This quarter, Molson-Coors announced that they will be building a brand
new, state-of-the-art brewery & distribution center in Saint-Hubert, on the
South Shore; the projected investment for this project will be $500 million. Average asking rents ($/s.f.) Net Rent
Additional
$6.00
Outlook
$5.00
As we keep waiting for the inevitable pullback in Montréal’s surging industrial $4.00
market, one can only assume the 2018 will be more tame than 2017. However, $3.00
in our current economic landscape, we expect that most Class A facilities that $2.00
are currently available will be leased, and speculative construction will $1.00
continue to increase. $0.00
For more information, contact: Dimitri (Jimmy) Mouhteros | dimitri.mouhteros@am.jll.com 2013 2014 2015 2016 YTD 2017
© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.Grande région de
Q2 2017 Montréal
Industrial Insight
Les loyers peuvent-ils encore augmenter? Nous croyons
que ce sera le cas en 2018
• Le loyer affiché moyen a atteint un nouveau palier, se hissant à un Indicateurs Prévisions
niveau sans précédent dans l'histoire du marché Absorption nette CDA 4 305 936 pi. ca ▼
• Il y a de plus en plus de projets de construction spéculative, Absorption nette TRI 2 388 663 pi.ca ▼
particulièrement à Saint-Laurent, où 217 000 pieds carrés sont en cours En construction 2 291 180 pi.ca ▲
de construction Inoccupation 4,9 % ▼
• Molson-Coors annonce un immense chantier
Loyer affiché moyen 6,03 $/pi.ca ▲
Même si nous pensions que le marché industriel de la grande région de Montréal Amélioration locatives En baisse ▼
(GRM) ne pouvait pas se resserrer davantage...cela s’est produit. Au cours du plus
récent trimestre, l'absorption nette a atteint un niveau légèrement inférieur à 2,4 Offre et demande (pi.ca) Absorption nette
millions de pieds carrés, ce qui porte l'absorption nette totale à 4,3 millions de pieds Nouvelle offre
5,000,000
carrés, pour l’année 2017. Par conséquent le taux d’inoccupation global a glissé sous
la barre des 5 % et loyer affiché moyen a franchi le seuil de 6,00 $ du pied carré. De
nombreuses transactions d’envergure ont été conclues dans la GRM, au cours du
0
quatrième trimestre. La plus importante concerne le projet de construction sur
commande de 330 000 pieds carrés entrepris par XTL Transport au 9135, boulevard
Henri-Bourassa Est, à Montréal-Est. Ses anciennes installations de Dorval ne sont plus
-5,000,000
fonctionnelles, compte tenu de l'expropriation de l’emprise ferroviaire servant au
2013 2014 2015 2016 CDA
transport de marchandises. Cette expropriation a pour but de permettre la réalisation
2017
du système léger sur rail de la Caisse de dépôt et placement du Québec.
Le volume des ventes a diminué au cours du dernier trimestre de 2017, ce qui est Inoccupation
principalement attribuable au fait que le niveau des offres de vente a diminué. En
même temps que le marché de la vente continue de se resserrer, nous constatons 6,5 %
6,3 % 6,1 % 5,8 %
que d’importantes transactions ont été conclues de gré à gré. Par exemple, Dollarama 4,9 %
a acheté le 8475-8499 Place Devonshire pour 18 millions $ (121 320 pieds carrés) et
Vista a vendu à PDI Bulk un terrain situé à Varennes, pour la somme de 11,25 millions
$ (l'autre partie du terrain étant vouée au nouveau centre de distribution de Costco).
Il y a actuellement un peu moins de 2,3 millions de pieds carrés en construction dans
la GRM. Au cours du plus récent trimestre, Molson-Coors a annoncé la construction 2013 2014 2015 2016 CDA 2017
d’un tout nouveau centre de brassage et de distribution à la fine pointe de la
technologie à Saint-Hubert, sur la Rive-Sud. L’investissement total prévu pour ce
projet est de 500 millions $. Loyer affiché moyen ($/pi.ca) Loyer…
Additionnel
Perspectives $6.00
En attendant le repli inévitable du marché industriel haussier de Montréal, on ne peut $5.00
que présumer que l'année 2018 sera plus calme que ne l’a été 2017. Toutefois, étant $4.00
donné le contexte économique actuel, nous prévoyons que la plupart des $3.00
$2.00
installations de catégorie A actuellement disponibles trouveront preneur sur le
$1.00
marché de la location, et que l’activité de construction spéculative continuera $0.00
d'augmenter. 2013 2014 2015 2016 CDA
Pour obtenir plus de renseignements, veuillez communique avec : Dimitri (Jimmy) Mouhteros | dimitri.mouhteros@am.jll.com 2017
© 2018 Jones Lang LaSalle IP, Inc. Tous drois réservés. Les renseignments contenus aux présentes proviennes de sources que nous jugeons fiables. Toutefois, nous ne faisons aucune
declarations ni ne donnons aucune garantie quant à l’exactitude desdits renseignements.About JLL JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $145 billion. At the end of the third quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of over 80,000. As of September 30, 2017, LaSalle Investment Management had $59.0 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit ir.jll.com. About JLL Research JLL’s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today’s commercial real estate dynamics and identify tomorrow’s challenges and opportunities. Our more than 400 global research professionals track and analyze economic and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives. Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions. Office locations: TORONTO TORONTO NORTH MISSISSAUGA MONTRÉAL 22 Adelaide St. W, Suite 2600 235 Yorkland Blvd, Suite 500 110 Matheson Blvd W, Suite 107 1, Place Ville Marie, Suite 3838 Toronto, ON M5H 4E3 Toronto, ON M2J 4Y8 Mississauga, ON L5R 4G7 Montréal, QC H3B 4M6 Tel: +1 416 304 6000 Tel: +1 647 728 0457 Tel +1 905 502 6116 Tel +1 514 849 8849 Fax: +1 416 304 6001 Fax: +1 416 642 0915 Fax +1 905 502 5466 Fax +1 514 849 6919 OTTAWA EDMONTON CALGARY VANCOUVER 275 Slater Street, Suite 1004 10088 – 102 Avenue, Suite No. 2101 301-8th Avenue SW, Suite 500 355 Burrard Street, 14th Floor Ottawa, ON K1P 5H9 Edmonton, AB T5J 2Z1 Calgary, AB T2P 1C5 Vancouver, BC V6C 2G6 Tel +1 613 656 0145 Tel +1 780 328 2550 Tel +1 403 456 2104 Tel +1 604 998 6001 Fax +1 613 288 0109 Fax +1 780 328 5486 Fax +1 587 880 9966 Fax +1 604 998 6018 For more information, please contact: Thomas Forr Ben Wedge Research Manager Senior Analyst +1 416 304 6047 +1 604 998 6032 thomas.forr@am.jll.com ben.wedge@am.jll.com www.jll.ca/research ©2018 Jones Lang LaSalle IP, Inc. All rights reserved. No part of this publication may be reproduced by any means, whether graphically, electronically, mechanically or otherwise howsoever, including without limitation photocopying and recording on magnetic tape, or included in any information store and/or retrieval system without prior written permission of Jones Lang LaSalle. The information contained in this document has been compiled from sources believed to be reliable. Jones Lang LaSalle or any of their affiliates accept no liability or responsibility for the accuracy or completeness of the information contained herein and no reliance should be placed on the information contained in this document.
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