wr industrialmarketreport 2015q4

7/25/2019 WR IndustrialMarketReport 2015Q4

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Research &Forecast Report

WATERLOO REGION

INDUSTRIAL

Fourth Quarter 2015
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2/82 Research & Forecast Report | Fourth Quarter 2015 | Waterloo Region / Industrial | Colliers International

Market Summaries

City of Cambridge..........................................................................................................4

City of Kitchener .....................................................................................................5

City of Waterloo ......................................................................................................6

Glossary ............................................................................................................................... 7

Table of Contents



Waterloo Region Market Overview

The Regions industrial market remains robust with strongmarket activity and demand in Q4, leading the way to astrong start to 2016. Driven by low interest rates, relativeease of borrowing, and in many cases, above average

loan-to-value ratios, demand is primarily centered aroundpurchase opportunities. Cost of capital aside, manywould-be tenants are exploring purchase options sincemonthly carrying costs are comparable to, if not less thanleasing options with associated expenses. Demand forspace continues to be focused on business parks close toHighway 401; Cambridge experiences the most demandand growth, and Waterloo sees the lowest overall activity.Supply of good quality purchase options remains low;buildings are often sold before market exposure, and, insome cases, with multiple offers. Demand for better

quality space remains a key characteristic of the overallmarket, however, to purchase, users demonstrate awillingness to compromise certain requirements whilebeing less willing to do so for lease options. Q4 saw acontinued downward trend in the availability of A Classspace, now at just 4.33% compared to 4.96% in Q3 and5.01% in Q2. Although demand for rental space continuesto lag behind the demand for purchase opportunities,there are positive signs that the leasing market isimproving with activity at Blue Top Properties newdevelopment at 780 Wilson Avenue in Kitchener, BentallKennedys new building at 20 Tyler Street in Cambridge,and Karandas new development at 500 JamiesonParkway. Lease activity of 168,000 SF in Q4 2015 isdown considerably compared to Q4 2014 at 284,000 SF.The vacancy rate increased from 6.07 to 6.82%, largely

Market IndicatorsRelative to prior period

Waterloo RegionQ

Waterloo RegionQ Trend

VACANCY .% .%

NET ABSORPTION , -,

CONSTRUCTION , ,

RENTAL RATE* . .

Note: Construction is the change in Under Construction.* Rental rates for current quarter are asking weighted averages for all submarkets.

due to the recently vacated 358,499 SF Leer facility inKitchener and two buildings in Cambridge (289,657 SF),resulting in negative absorption of 442,816 SF.

Looking forward to Q1 2016, strong purchase demand is

expected to continue due to low interest rates andcarrying costs, however with few quality purchaseoptions available, transaction activity may be affected.

Investment Market

Industrial sales in Q4 2015 totalled $30.9M, one third of

Q3 ($93.5M), 38.5% more than in Q2 ($19M), and on par

with Q1 2015 ($30.5M). Four of nine notable industrial

transactions were cap rate sales with unadjusted cap

rates ranging from 6.55% to 7.50% and average pricing

of $84/SF. This is consistent with the cap rate range for

all of 2015 (6.40% to 7.68%) with the average cap ratebeing 6.93% and average pricing of $85/SF. Tenanted

industrial properties are still in high demand and 75% of

investment sales are completed before hitting the market.

Source: Colliers International

Historical Performance & Forecast | Waterloo Region Industrial Market

(1,000,000)

(800,000)

(600,000)

(400,000)

(200,000)

0

200,000

400,000

600,000

800,000

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2010Q1

2010Q2

2010Q3

2010Q4

2011Q1

2011Q2

2011Q3

2011Q4

2012Q1

2012Q2

2012Q3

2012Q4

2013Q1

2013Q2

2013Q3

2013Q4

2014Q1

2014Q2

2014Q3

2014Q4

2015Q1

2015Q2

2015Q3

2015Q4

2016Q1

2016Q2

2016Q3

2016Q4

Net Absorption New Supply Vacancy Rate



Notable Lease Transactions

TENANT NAME & ADDRESS TYPEAPPROXIMATE

SIZE (SF)

.Toyota Tsusho Canada Inc. Franklin Boulevard

Headlease ,

6

3

5

Notable Lease Notable Sale New Supply

City of Cambridge

Cambridge remains the most active of the Regions industrialmarket; with quick access to Highway 401, readily availableserviced land and reasonable development charges, it willcontinue to grow, attracting new investment. New speculativeprojects attract tenants seeking modern, efficient facilitieswhile less functional, outdated buildings sit with vacancies.

Construction activity is recovering as demonstrated by bothspec and design-build projects now under way. Purchaseoptions are in demand; availability of purchase inventory isthe limiting factor.

Trends

> Vacant inventory consists mostly of older Class B and C space

while demand is strong for newer Class A space.

> New spec space will generate activity in 2016 with new options

for tenants seeking high quality, functional and efficient space.

> Sale activity remains strong as low interest rates and financing

availability encourage users to purchase.

Summary StatisticsCambridge Industrial Market Q Q Trend

Industrial Inventory ,, ,,

Net Absorption -, -,

Vacancy Rate .% .%

Average Asking Net Rent(Per Square Foot)

. .

Historical Performance and Forecast

(600,000)

(400,000)

(200,000)

0

200,000

400,000

600,000

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2010Q1

2010Q2

2010Q3

2010Q4

2011Q1

2011Q2

2011Q3

2011Q4

2012Q1

2012Q2

2012Q3

2012Q4

2013Q1

2013Q2

2013Q3

2013Q4

2014Q1

2014Q2

2014Q3

2014Q4

2015Q1

2015Q2

2015Q3

2015Q4

2016Q1

2016Q2

2016Q3

2016Q4


Notable Sale Transactions

PURCHASER & ADDRESS PRICEAPPROXIMATE

SIZE (SF)

.AGS Automotive Systems Conestoga Boulevard

,, ,

. Ontario Inc. Groh Avenue

,, ,

.Oceanic Marketing Inc. Pinebush Road

,, ,

Upcoming New Inventory

ADDRESS COMPLETIONAPPROXIMATE

SIZE (SF)

. Commerce Court Q/Q ,

. Heroux Devtek Drive Q/Q ,

12

4





SIZE (SF)

. Trillium Drive Headlease ,

. Groff Place Headlease ,

. Forwell Road Headlease ,

4


City of Kitchener

Kitcheners industrial market activity continues to be restrainedby the lack of quality Class A space available to both tenantsand prospective buyers. Available options comprise older ClassB and C space, or buildings that are poorly sized for demandrequirements. Industrial users actively seek opportunitiesin the neighbouring City of Cambridge due to its superior

Highway 401 proximity.

Trends

> Much of the available space is functionally challenged or

obsolete; these facilities present opportunties for redevelopment

or adaptive reuse to gain tenancies.

> Downward pressure on lease rates is a result of functionally

challenged buildings attempting to attract tenants through lower

lease rates.

> Industrial growth in Kitchener remains stagnant due to the lack

of developed industrial land. The City of Kitchener is the primary

land developer.> Blue Top Properties new spec development at Wilson Avenue

and Goodrich Drive brings much-needed Class A space to

Kitchener; Phase I is ready and partially leased, Phase II is under

construction with some pre-leasing completed.

Summary StatisticsKitchener Industrial Market Q Q Trend


Net Absorption , -,

Vacancy Rate .% .%


. .


(400,000)

(300,000)

(200,000)

(100,000)

0

100,000

200,000

300,000

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2010Q1

2010Q2

2010Q3

2010Q4

2011Q1

2011Q2

2011Q3

2011Q4

2012Q1

2012Q2

2012Q3

2012Q4

2013Q1

2013Q2

2013Q3

2013Q4

2014Q1

2014Q2

2014Q3

2014Q4

2015Q1

2015Q2

2015Q3

2015Q4

2016Q1

2016Q2

2016Q3

2016Q4




SIZE (SF)

.Nutri-Oeuf Inc. Trillium Drive

,, ,

. Mill Street ,, ,



SIZE (SF)

.For Lease Goodrich Drive

Q/Q ,

1

6

2

3

5




City of Waterloo

The smallest and least active industrial market of the threecities in the Region, the City of Waterloo is challenged by itslack of both Highway 401 proximity and industrial developmentopportunities. Over the past decade, Waterloos industrialinventory has decreased as many facilities were repurposed toaccommodate the explosion of office and technology users.

The remaining inventory trends to light industrial uses.

Trends

> Waterloos declining inventory will stabilize as BlackBerry-

influenced conversions and demolitions cease.

> New development/construction will be limited to small additions

to the existing facilities.

> Activity in Waterloo has been, and will continue to be, dominated

by users who are already located in and wish to remain in the

City of Waterloo.

Summary StatisticsWaterloo Industrial Market Q Q Trend


Net Absorption , ,

Vacancy Rate .% .%


. .


(300,000)

(200,000)

(100,000)

0

100,000

200,000

300,000

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2010Q1

2010Q2

2010Q3

2010Q4

2011Q1

2011Q2

2011Q3

2011Q4

2012Q1

2012Q2

2012Q3

2012Q4

2013Q1

2013Q2

2013Q3

2013Q4

2014Q1

2014Q2

2014Q3

2014Q4

2015Q1

2015Q2

2015Q3

2015Q4

2016Q1

2016Q2

2016Q3

2016Q4


1



SIZE (SF)

. Colby Drive Headlease ,

. Randall Drive Headlease ,

. Conestogo Road Headlease ,



SIZE (SF)

.Schembri Property Mgmt. Davenport Road

,, ,

.Musashi Auto Parts Canada Northland Road

,, ,



SIZE (SF)

Not Applicable

4

5

2

3



Glossary

Weighted Average Asking Net RentThe dollar amount requested by landlords for direct available space, not including subleases, expressed in dollars per

square foot per year.

Availability

The amount of available space and available space to be delivered to the market within six months, divided by the

markets inventory base including those future deliveries. Available space is space that is available for lease, and may or

may not be vacant.

Net AbsorptionThe net change in physically occupied space between the current measurement period, and the last measurement

period. It can be either positive or negative.

VacancyThe amount of vacant space divided by the building inventory base. Vacant space is physically unoccupied, and it may

or may not be available for lease or sublease. This is physical vacancy. It is not determined whether a tenant is paying

rent on the space.


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Copyright 2016 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to

ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult

their professional advisors prior to acting on any of the material contained in this report.

About Colliers International Group Inc.

Colliers International Group Inc. is a global leader in commercial real estate services, with more than16,300 professionals operating out of 502 offices in 67 countries. Colliers International delivers a full rangeof services to real estate occupiers, owners and investors worldwide, including global corporate solutions,brokerage, property and asset management, hotel investment sales and consulting, valuation, consultingand appraisal services, mortgage banking and insightful research. In 2014 the firm handled $97 billion intotal transaction value for 84,600 leases and sales. Colliers manages more than 1.7 billion square feet ofcommercial properties.

Colliers International Group Inc. generates more than US$2.3 billion in annual revenues. With significantinsider ownership and an experienced management team, Colliers International has a long-term track recordof creating value and superior returns for shareholders previously under the ownership of FirstService,and as of June 2015, continuously as an independently owned company. The common shares of ColliersInternational Group Inc. trade on the NASDAQ under the symbol CIGI and on the Toronto Stock Exchangeunder the symbol CIG.

collierscanada.com

502offices in

67countries on

6continentsUnited States: 140

Canada: 31

Latin America: 24

Asia Pacific: 199

EMEA: 108

$2.3billion inannual revenue

1.7billion square feetunder management

16,300professionalsand staff

FOR MORE INFORMATION:

Ron JansenVice President, Sales Representative+1 519 904 [email protected]

Justin Lavoie

Associate Vice President, Sales Representative+1 519 904 7008

[email protected]

Chris Thoms

Sales Representative+1 519 904 [email protected]

Colliers International | Waterloo Region305 King Street West, Suite 606Kitchener, ON N2G 1B9 | Canada

+1 519 570 1330
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