Cooler Storage Net Rental Acceleration
Food processors and warehousers in the Greater Toronto Area with upcoming lease expiries will face sticker shock as they realize the rapid acceleration of rents. Finding cold storage space in the region has become increasingly difficult due to all-time low availabilities and the almost non-existent development pipeline of new facilities.
This environment has been exacerbated by the explosive demand for food products seen as a by-product of the pandemic. Both in-person grocers and food delivery services have, as a result, looked to stock up on inventories, increasing demand downstream to their vendors and suppliers.
Figure 1: Cooler Storage Net Rental Rates – GTA vs Secondary/Tertiary Markets
As illustrated in Figure 1, there is a costly premium in order to secure cooler storage facilities within the GTA. Primary submarkets such as Brampton, Toronto, and Mississauga are well sought-after because of their location – reducing transportation costs and adding operational efficiencies.
Rising Renewal Costs
Companies that are not proactive in addressing their lease expiries up to 18-24 months in advance may be forced to pay the higher then-market rents in order to successfully renew. As a result, they may have to undergo the expensive process of relocating their operations in a market with almost no available space.
As depicted, moving further out of the GTA – although adding to transportation costs – can provide significant cost savings. For example, saving $1 per square foot net for a cooler storage facility of 100,000 square feet, can result in approximately $1 million in savings over the course of a 10-year lease.
Summary
Overall, the lack of supply of cooler storage facilities, coupled with consumer demand, has driven rents to all-time highs. These changes have caused food processors, packagers, and warehousers to consider relocating to secondary and tertiary markets to take advantage of cost savings and improve their bottom line.
