Employees work at the Amazon fulfillment centre in Brampton, Ont. in 2018.Chris Young/The Canadian Press
Unrelenting demand for Canada’s storage and distribution warehouses is vaulting that segment of the real estate market into a new echelon, with industrial properties in and around cities such as Toronto and Montreal commanding some of the fastest-rising prices in the world.
The market for warehouse space is so strong that the national vacancy rate has fallen to a record low of 1.6 per cent, according to commercial real estate services and investment firm CBRE Group Inc. Supply is so tight that some landlords have been able to raise rents more than 100 per cent in tenant turnovers and lease renewals.
The returns have attracted some of the world’s most sophisticated real estate players. In June, Prologis Inc. PLD-N, a massive industrial property owner based in San Francisco, bought land in the Greater Toronto Area to develop a new warehouse. The $500-million purchase price amounted to almost $2.5-million per acre, more than double the going rate five years ago.
Yet there are fears this can’t last much longer. Major retailers have cautioned that the e-commerce boom has reached its limit, and this spring Amazon spooked investors by announcing plans to sublease some of its warehouse space. At the same time, interest rates have spiked, making commercial mortgages more expensive, and incessant inflation has sent development costs soaring.
So far, though, industrial properties here have defied fears of a sector-wide cooling, and the markets in four Canadian cities are the tightest in North America. “The party is not over,” said CBRE Canada vice-chair Paul Morassutti. “It might not be quite the rager it was, but it’s definitely not over.”
In mid-August, Summit Industrial Income REIT, which exclusively owns Canadian warehouses, reported quarterly earnings and disclosed that its average rent increase this year when a lease was renewed or in a tenant turnover was 46 per cent.
Summit also reported that the national average rental rate across the sector rose to a record high of $12.25 per square foot. Five years ago, it was less than $7.
Demand for warehouses took off around 2016 as e-commerce gathered steam, then shot up through the pandemic as consumers relied heavily on online shopping. Although e-commerce growth has slowed of late because lockdown restrictions have lifted, online sales are still rising overall, just at a slower rate.
CBRE estimates that for every billion dollars in e-commerce sales in Canada, approximately 1.25 million square feet of warehouse inventory are needed. That means another 90 million square feet of space could be needed in the next five years. Canada currently has 1.9 billion square feet of industrial space.
The need could be even greater if just-in-time inventory systems become more prevalent, with companies increasingly turning to onshore sourcing in order to mitigate the supply chain issues that have plagued them over the past 2½ years.
High transportation costs have also boosted industrial property values, something Mr. Morassutti said is underappreciated. Typically, logistics and transport expenses account for 70 per cent of supply chain outlays, while real estate is only 5 per cent of the burden. That means that for every dollar saved on logistics – by having warehouses closer to the customer, for instance – a company can theoretically pay 14 times more on rent.
This month, Summit disclosed that it recently re-leased a one-storey warehouse in Markham, Ont., northeast of Toronto, after only one month of downtime and increased the monthly rent by 42 per cent. At another property in the GTA, the REIT re-leased the space with no downtime – and a 117-per-cent rent increase.
Summit’s shares, which trade on the Toronto Stock Exchange, have soared 223 per cent, including distributions, over the past five years. Rivals Granite REIT and Dream Industrial REIT, which own a mix of Canadian and international properties, have gained 98 per cent and 86 per cent, respectively. The equivalent return for the S&P/TSX Composite Index is 57 per cent.
Because residential real estate has cooled so quickly in Canada over the past six months, and commercial sectors such as office properties have also struggled, there are fears warehouses will get hit, too. The main concern is that, with the pace of construction at a record high, the market will eventually get flooded with industrial properties.
However, even after all the properties currently under construction are completed, the total amount of square footage available will increase just 2.3 per cent, according to CBRE.
As for fears that Amazon is scaling back in the U.S., which sent a chill through the entire sector, that just hasn’t materialized. “What’s interesting is we’ve been monitoring the market pretty closely to see what Amazon is doing,” Granite REIT chief executive Kevan Gorrie said on a conference call with analysts and investors this month, “and there are so far almost zero, it’s negligible, the number of assets that Amazon is actually looking to sublease.”
Because the industrial market has been so hot, it is widely believed there will be some softening, particularly in other countries. “There are some U.S. markets that don’t have many constraints on land or constraints on development, and those markets are finding rents stabilizing much quicker,” Dream Industrial CEO Brian Pauls told analysts and investors on the company’s quarterly conference call.
“But in the GTA, certainly, and in Montreal, what we’re seeing are rents continuing to grow,” he said.
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MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
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