Industrial demand outstripping supply
A new Re/Max commercial report sees ongoing supply shortages for the city’s industrial property sector
ACCORDING TO THE Re/Max Commercial Real Estate Report 2022 released this week, upward pressure on available industrial and commercial properties in London will remain through the foreseeable future, with shortages existing in the industrial sector being particularly acute.
“Vacancy rates for industrial space have currently fallen below one per cent,” the report states. “Availability rates currently hover at 1.3 per cent for industrial product in London, and spillover has pushed into neighbouring St. Thomas, Elgin County, Woodstock, Strathroy, Mount Bridges and Dorchester as demand continues to climb.”
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End users are particularly active and are willing to pay more to secure both space and ownership, the report states. Scarcity of product has pushed up rental rates by about 50 per cent, and new industrial lease rates are achieving levels previously unseen.
And despite city efforts to cool the red-hot industrial market by doubling prices from $125,000 an acre to $250,000 per acre for city-owned industrial land, Re/Max says the increase is unlikely to have any impact on fixing the current supply shortage.
“London and the surrounding areas continue to attract industry including agri-food, manufacturing, digitalized media and technology, health and professional services, with large companies such as Amazon, Maple Leaf Foods, Dr. Oetker and CDK Global choosing to lay roots in the city and area. Over a million square feet of industrial space is currently under construction.”
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On the office side, while there has been a slight reduction in overall office availability rates at 18.1 per cent, there continues to be post-pandemic challenges in terms of the return to the office in the downtown core, where rates are higher.
Office lease rates have been competitive with landlords undertaking total conversions for quality tenants, and the report says demand for suburban office space remains healthy. The report points to several new, multi-storey office developments that are underway in the city’s west end, as well as the recent provincial government announcement of the relocation of the Workplace Safety and Insurance Board (WSIB) offices, bringing 3,000 potential new employees to London.
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Regarding retail space, the report says the sector continues to strengthen as restrictions put in place over the pandemic ease.
“Traffic is picking up in the area malls, with retail sales volumes climbing,” the report states. “Improvements continue to be made to retail malls that enhance the shopper’s experience. Many landlords have focused on larger restaurant chains and exciting new recreation areas to attract shoppers to the malls.” 