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The sharp rise of industrial real estate sale prices have not deterred investors, developers or users, especially in Peel Region

  • ​Significant investor demand for Class A distribution facilities in the Greater Toronto Area (GTA) is putting downward pressure on cap rates  which is now 5.3 percent (down from  5.8 percent a year ago) for this type of product. And because lease rates are projected to rise by at least 5.0 percent in 2018, we anticipate that there will be further compression of cap rates. What has this led to? Investors bidding on redevelopment locations that have low site coverages, versus competing for greenfield projects in “centre ice” locations that have low cap rates.

  • The Peel Region (a GTA West submarket) is made up of Mississauga, Brampton and Caledon, which in total accounts for 36 percent of the total inventory in the GTA. And over the last four years the region has accounted for 66 percent of total sale transactions in the whole industrial market. Why? The region is a prime location for tenants looking to move and investors are keen on growing their portfolio here. This is best illustrated when in Q2 2017 a fully leased Class A 895,000 square foot distribution facility sold for a 3.96 percent cap rate, setting a new record in the GTA for a class A building. ​​

Source: JLL Research




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