SECURING SPACE IN A COMPETITIVE INDUSTRIAL MARKET
November 19, 2020
LONG-TERM GROWTH IN A COMPETITIVE INDUSTRIAL MARKET
Picture this. It has been months into the economic shutdowns, and, despite the weekly forecast meetings, it’s become more ‘art’ than science in trying to interpret your internal data to establish long-term growth needs.
For many industrial Tenants, this was their situation throughout 2020. On one hand, it may have been difficult to reach a consensus internally. While on the other, doing a deal was likely challenging due to all the continually moving parts; limited financing, skittish investors, and cautious landlords. Not to mention that, in the Greater Toronto Area, industrial space has become extremely scarce and rental rates have steadily increased over the past few years.
At the same time, we witnessed one of the largest booms in e-commerce, the onshoring of manufacturing, and the ‘arms race’ in logistics, warehousing, and distribution; making matters even more difficult to navigate.
Challenge:
We were retained by our Client to help them renew or relocate their industrial facility. The timing and uncertainty added a layer of complexity that we would have to steer through. Overall, there were limited suitable relocation options, while market rental rates were difficult to establish due to the economic situation, lack of benchmark data, and rapidly evolving industrial landscape.
Features:
- Approximately 50,000SF;
- Medium-term lease;
- Zoning: E2 Industrial;
- Drop Lighting for quality control area.
Transaction:
Our strategy from the beginning was to open communication with the Landlord and to solicit a proposal from them. At the same time, we leveraged our network and internal processes to find as much market intel and property data as we could. This allowed us to establish fair and accurate rental rates with which we could leverage in our ongoing conversation. Throughout our due diligence, we also made note of possible relocation options should such a scenario become unavoidable.
Results:
As a result of our process and approach, we were able to successfully renew the lease during the height of the pandemic, and at market rates that were below our Client’s initial expectations. It is important to note that both Parties overcame a number of hurdles that were brought forward and were able to work in good faith to get the deal completed.
Summary
Overall, Tenants and Landlords of commercial space are constantly looking for opportunities to minimize costs and risks associated with their real estate footprints and portfolios.
Successfully negotiating a medium- to long-term lease may provide the security and the stability that enables more accurate forecasting. Given the uncertainty in the world at-large, it may be prudent to explore all pertinent options available in order to make the best decision possible.
