HOW WE HELPED PACCAR NAVIGATE THE DESIGN-BUILD DEVELOPMENT PROCESS
December 17, 2020
Over the past several years, many Industrial Tenants have been arriving at similar conclusion when considering expanding or relocating in the Greater Toronto Area. Industrial rental rates continue to climb, as do land prices, development charges, and construction costs. Not to mention that much of the pre-leasing pipeline is already spoken for; with companies snapping up these facilities early on in the lifecycle.
This is especially prevalent in the West submarkets, where the bulk of industrial activity is occurring in the region. In particular, the Mississauga-North submarket, where this case study occurred, experienced 4 Million SF of net absorption in 2019, when only 1.1 Million SF of new supply was delivered. Despite the imbalance of supply and demand, scarce shovel-ready land remains a chronic bottleneck to ambitious developers seeking to bring on board more supply.
So, whether you are looking to secure space through a traditional lease, a pre-lease, or design-build development, there is typically no straightforward path. Rather, one should rely on a team or brokerage that is able to source and track off-market opportunities, as well as provide guidance to help navigate through the process. Finally, with all of the options and possibilities available, it may be prudent to put together the right strategy ahead of time for your specific needs.
With that being said, let’s examine how Lee Toronto helped their client Paccar secure a brand-new design-build distribution centre in a market with scarce industrial land and rising development costs.
Challenge:
PACCAR approached us looking to purchase or build a 150,000 to 175,000 square foot distribution centre with expansion land in the Greater Toronto Area, preferably in the GTA-West submarkets.
There was also a strong preference towards purchasing and building as opposed to pre-leasing new development. This requirement would add another layer of complexity in terms of guidance and management.
Overview:
- 3535 Argentia Road, Mississauga, Ontario
- Distribution Centre with Expansion Land
- 160,000 SF Total
- 10.4 Acres
- Land Purchase: $9,900,000
- Construction Value: $24,000,000
Transaction:
Our strategy for success was to clearly establish a process and set milestone objectives with our Client. We collected market information from across the Greater Toronto Area and analyzed all options including cost of land/properties, cost of development, HR impact, and logistics.
We initiated discussions with owners, brokers, and various municipalities to ensure we had a full understanding of each opportunity.
Once we qualified all options, we were able to establish a shortlist of preferred locations and developed a feasibility analysis for each.
Results:
After initiating discussions with each owner from a shortlist of options, we ultimately focused our attention on one preferred site. After successful negotiations Paccar secured a 10.4-acre serviced lot on Argentia Road in Mississauga, just off Highway 401.
Following the acquisition, we assisted in coordinating land development functions including; construction design, consulting services, site plan, geotechnical and environmental reports, traffic studies, and site servicing. We were then retained to assist with project management throughout the project lifecycle.
We assisted in negotiations of the design build services construction contract, and liaised with the developer, municipality, and other stakeholders. We also consulted on site plan design and building configuration to ensure optimal operational efficiencies and future growth.
“Now, with the new location, we have everything for Eastern Canada here. Great project for Paccar.”
– David Danforth, GM and VP, Paccar
Summary
Overall, Industrial Tenants looking for space in the Greater Toronto Area may come to the realization that finding the perfect space is a collaborative process that can take several months, or even years, to fully complete.
With industrial rental rates at all-time highs, land values continuing to escalate, as well as much of the pipeline of new properties already pre-leased, it is crucial to be proactive and stay on the pulse of the market when considering expanding or relocating.
