Waterloo Region Industrial Market Report Q4 2015

Research &
Forecast Report
WATERLOO REGION
INDUSTRIAL
Fourth Quarter 2015

2 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 Region’s industrial market remains robust with strong
market activity and demand in Q4, leading the way to a
strong start to 2016. Driven by low interest rates, relative
ease of borrowing, and in many cases, above average
loan-to-value ratios, demand is primarily centered around
purchase opportunities. Cost of capital aside, many
would-be tenants are exploring purchase options since
monthly carrying costs are comparable to, if not less than
leasing options with associated expenses. Demand for
space continues to be focused on business parks close to
Highway 401; Cambridge experiences the most demand
and growth, and Waterloo sees the lowest overall activity.
Supply of good quality purchase options remains low;
buildings are often sold before market exposure, and, in
some cases, with multiple offers. Demand for better
quality space remains a key characteristic of the overall
market, however, to purchase, users demonstrate a
willingness to compromise certain requirements while
being less willing to do so for lease options. Q4 saw a
continued downward trend in the availability of A Class
space, now at just 4.33% compared to 4.96% in Q3 and
5.01% in Q2. Although demand for rental space continues
to lag behind the demand for purchase opportunities,
there are positive signs that the leasing market is
improving with activity at Blue Top Properties’ new
development at 780 Wilson Avenue in Kitchener, Bentall
Kennedy’s new building at 20 Tyler Street in Cambridge,
and Karanda’s new development at 500 Jamieson
Parkway. Lease activity of 168,000 SF in Q4 2015 is
down considerably compared to Q4 2014 at 284,000 SF.
The vacancy rate increased from 6.07 to 6.82%, largely
Market Indicators
Relative to prior period
Waterloo Region
Q3 2015
Waterloo Region
Q4 2015 Trend
VACANCY 6.07% 6.82%
NET ABSORPTION 158,762 -442,816
CONSTRUCTION 106,255 89,616
RENTAL RATE* $4.73 $4.76
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 in
Kitchener 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 and
carrying costs, however with few quality purchase
options 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 rate
being 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 TYPE
APPROXIMATE
SIZE (SF)
1.
Toyota Tsusho Canada Inc.
1250 Franklin Boulevard
Headlease 45,170
6
3
5
Notable Lease Notable Sale New Supply
City of Cambridge
Cambridge remains the most active of the Region’s industrial
market; with quick access to Highway 401, readily available
serviced land and reasonable development charges, it will
continue to grow, attracting new investment. New speculative
projects attract tenants seeking modern, efficient facilities
while less functional, outdated buildings sit with vacancies.
Construction activity is recovering as demonstrated by both
spec and design-build projects now under way. Purchase
options are in demand; availability of purchase inventory is
the 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 Statistics
Cambridge Industrial Market 2015 Q3 2015 Q4 Trend
Industrial Inventory 31,479,223 31,497,664
Net Absorption -8,090 -166,471
Vacancy Rate 5.17% 5.70%
Average Asking Net Rent
(Per Square Foot)
$4.86 $4.84
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 PRICE
APPROXIMATE
SIZE (SF)
2.
AGS Automotive Systems
560 Conestoga Boulevard
$12,500,000 534,000
3.
2456472 Ontario Inc.
50 Groh Avenue
$3,900,000 102,949
4.
Oceanic Marketing Inc.
181 Pinebush Road
$2,600,000 42,000
Upcoming New Inventory
ADDRESS COMPLETION
APPROXIMATE
SIZE (SF)
5. 45 Commerce Court Q1/Q2 2016 43,290
6. 75 Heroux Devtek Drive Q2/Q3 2016 20,582
1
2
4

APPROXIMATE
SIZE (SF)
1. 615 Trillium Drive Headlease 16,000
2. 25 Groff Place Headlease 10,250
3. 5 Forwell Road Headlease 10,250
4
City of Kitchener
Kitchener’s industrial market activity continues to be restrained
by the lack of quality Class A space available to both tenants
and prospective buyers. Available options comprise older Class
B and C space, or buildings that are poorly sized for demand
requirements. Industrial users actively seek opportunities
in 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 Statistics
Kitchener Industrial Market 2015 Q3 2015 Q4 Trend
Net Absorption 157,937 -305,000
(Per Square Foot)
$4.36 $4.37
(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
APPROXIMATE
SIZE (SF)
4.
Nutri-Oeuf Inc.
860 Trillium Drive
$4,000,000 62,519
5. 300 Mill Street $2,640,000 30,699
ADDRESS COMPLETION
APPROXIMATE
SIZE (SF)
6.
For Lease
25 Goodrich Drive
Q2/Q3 2016 65,572
1
6
2
3
5

City of Waterloo
The smallest and least active industrial market of the three
cities in the Region, the City of Waterloo is challenged by its
lack of both Highway 401 proximity and industrial development
opportunities. Over the past decade, Waterloo’s industrial
inventory has decreased as many facilities were repurposed to
accommodate the explosion of office and technology users.
The remaining inventory trends to light industrial uses.
Trends
>> Waterloo’s 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 Statistics
Waterloo Industrial Market 2015 Q3 2015 Q4 Trend
Net Absorption 8,915 28,655
(Per Square Foot)
$5.13 $5.40
(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
APPROXIMATE
SIZE (SF)
1. 623 Colby Drive Headlease 18,195
2. 106 Randall Drive Headlease 12,355
3. 483 Conestogo Road Headlease 9,818
APPROXIMATE
SIZE (SF)
4.
Schembri Property Mgmt.
675 Davenport Road
$2,400,000 43,795
5.
Musashi Auto Parts Canada
65 Northland Road
$2,160,000 16,239
ADDRESS COMPLETION
APPROXIMATE
SIZE (SF)
Not Applicable
4
5
2
3

Glossary
Weighted Average Asking Net Rent
The 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
market’s inventory base including those future deliveries. Available space is space that is available for lease, and may or
may not be vacant.
Net Absorption
The net change in physically occupied space between the current measurement period, and the last measurement
period. It can be either positive or negative.
Vacancy
The 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.

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 than
16,300 professionals operating out of 502 offices in 67 countries. Colliers International delivers a full range
of services to real estate occupiers, owners and investors worldwide, including global corporate solutions,
brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting
and appraisal services, mortgage banking and insightful research. In 2014 the firm handled $97 billion in
total transaction value for 84,600 leases and sales. Colliers manages more than 1.7 billion square feet of
commercial properties.
Colliers International Group Inc. generates more than US$2.3 billion in annual revenues. With significant
insider ownership and an experienced management team, Colliers International has a long-term track record
of 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 Colliers
International Group Inc. trade on the NASDAQ under the symbol “CIGI” and on the Toronto Stock Exchange
under the symbol “CIG”.
collierscanada.com
502 offices in
67 countries on
6 continents
United States: 140
Canada: 31
Latin America: 24
Asia Pacific: 199
EMEA: 108
$2.3
billion in
annual revenue
1.7
billion square feet
under management
16,300
professionals
and staff
MARKET CONTACT:
Serguei Kaminski
Market Intelligence Coordinator | Waterloo Region
+1 519 904 7007
serguei.kaminski@colliers.com
REGIONAL AUTHORS:
Karl Innanen | Managing Director, Broker
Ron Jansen | Vice President, Sales Representative
Serguei Kaminski | Market Intellience Coordinator
Jennie Ross | Client Project Coordinator
Colliers International | Waterloo Region
305 King Street West, Suite 606
Kitchener, ON N2G 1B9 | Canada
+1 519 570 1330

Waterloo Region Industrial Market Report Q4 2015

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Mehr von Darren Shaw, SIOR

Mehr von Darren Shaw, SIOR (14)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

Waterloo Region Industrial Market Report Q4 2015