Research &

Forecast Report

WATERLOO REGION
INDUSTRIAL
Fourth Quarter 2015

Table of Contents
Market Summaries

City of Cambridge...........................................................................................................4
City of Kitchener...................................................................................................... 5
City of Waterloo....................................................................................................... 6

Glossary................................................................................................................................ 7

Research & Forecast Report | Fourth Quarter 2015 | Waterloo Region / Industrial | Colliers International

Waterloo Region Market Overview

The Regions 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
Kennedys new building at 20 Tyler Street in Cambridge,
and Karandas 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

Waterloo Region
Q3 2015

Waterloo Region
Q4 2015

6.07%

6.82%

NET ABSORPTION

158,762

-442,816

CONSTRUCTION

106,255

89,616

RENTAL RATE*

$4.73

$4.76

Relative to prior period

VACANCY

Trend

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.

Historical Performance & Forecast | Waterloo Region Industrial Market

Net Absorption

New Supply

Vacancy Rate

Source: Colliers International

Research & Forecast Report | Fourth Quarter 2015 | Waterloo Region / Industrial | Colliers International

2016 Q4

2016 Q3

2016 Q2

2016 Q1

2015 Q4

2015 Q3

2015 Q2

2015 Q1

2014 Q4

2014 Q3

2014 Q2

2014 Q1

2013 Q4

2013 Q3

2013 Q2

(1,000,000)

2013 Q1

(800,000)

2012 Q4

1.0%
0.0%
2012 Q3

(600,000)

2012 Q2

2.0%

2012 Q1

(400,000)

2011 Q4

(200,000)

3.0%

2011 Q3

4.0%

2011 Q2

200,000

5.0%

2011 Q1

400,000

6.0%

2010 Q4

600,000

7.0%

2010 Q3

8.0%

2010 Q2

800,000

2010 Q1

9.0%

City of Cambridge
Cambridge remains the most active of the Regions 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.

6
3
4
2

5
1

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.

Notable Lease

Summary Statistics

2015 Q3

2015 Q4

31,479,223

31,497,664

Net Absorption

-8,090

-166,471

Vacancy Rate

5.17%

5.70%

$4.86

$4.84

Cambridge Industrial Market

Industrial Inventory

Average Asking Net Rent

(Per Square Foot)

Trend

Notable Sale

Notable Lease Transactions

1.

TENANT NAME & ADDRESS

TYPE

Toyota Tsusho Canada Inc.

1250 Franklin Boulevard

Headlease

APPROXIMATE
SIZE (SF)

45,170

Notable Sale Transactions

PURCHASER & ADDRESS

AGS Automotive Systems

560 Conestoga Boulevard
2456472 Ontario Inc.
3.
50 Groh Avenue
Oceanic Marketing Inc.
4.
181 Pinebush Road
2.

Historical Performance and Forecast

10.0%

New Supply

PRICE

APPROXIMATE
SIZE (SF)

$12,500,000

534,000

$3,900,000

102,949

$2,600,000

42,000

COMPLETION

APPROXIMATE
SIZE (SF)

5. 45 Commerce Court

Q1/Q2 2016

43,290

6. 75 Heroux Devtek Drive

Q2/Q3 2016

20,582

600,000

9.0%
8.0%
7.0%

400,000

Upcoming New Inventory

200,000

ADDRESS

6.0%
5.0%

4.0%
(200,000)

3.0%
2.0%

(400,000)

1.0%
0.0%
2010 Q1
2010 Q2
2010 Q3
2010 Q4
2011 Q1
2011 Q2
2011 Q3
2011 Q4
2012 Q1
2012 Q2
2012 Q3
2012 Q4
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3
2014 Q4
2015 Q1
2015 Q2
2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
2016 Q4

(600,000)

Net Absorption

New Supply

Vacancy Rate

Research & Forecast Report | Fourth Quarter 2015 | Waterloo Region / Industrial | Colliers International

City of Kitchener
Kitcheners 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.

Notable Lease

Notable Sale

New Supply

Notable Lease Transactions

Summary Statistics
Kitchener Industrial Market

Industrial Inventory
Net Absorption
Vacancy Rate
Average Asking Net Rent
(Per Square Foot)

2015 Q3

2015 Q4

19,722,310

19,636,168

157,937

-305,000

8.45%

10.04%

$4.36

$4.37

TENANT NAME & ADDRESS

Trend

TYPE

APPROXIMATE
SIZE (SF)

1. 615 Trillium Drive

Headlease

16,000

2. 25 Groff Place

Headlease

10,250

3. 5 Forwell Road

Headlease

10,250

Notable Sale Transactions

PURCHASER & ADDRESS

4.

Historical Performance and Forecast

12.0%

300,000

Nutri-Oeuf Inc.
860 Trillium Drive

PRICE

APPROXIMATE
SIZE (SF)

$4,000,000

62,519

$2,640,000

30,699

ADDRESS

COMPLETION

APPROXIMATE
SIZE (SF)

For Lease
25 Goodrich Drive

Q2/Q3 2016

65,572

5. 300 Mill Street

200,000

10.0%

100,000

8.0%
0

6.0%

Upcoming New Inventory

(100,000)

4.0%
(200,000)

6.

2.0%

(300,000)

0.0%
2010 Q1
2010 Q2
2010 Q3
2010 Q4
2011 Q1
2011 Q2
2011 Q3
2011 Q4
2012 Q1
2012 Q2
2012 Q3
2012 Q4
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3
2014 Q4
2015 Q1
2015 Q2
2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
2016 Q4

(400,000)

Net Absorption

New Supply

Vacancy Rate

Research & Forecast Report | Fourth Quarter 2015 | Waterloo Region / Industrial | Colliers International

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, Waterloos 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
>> Waterloos declining inventory will stabilize as BlackBerryinfluenced 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.

Notable Lease

Summary Statistics
Waterloo Industrial Market

Industrial Inventory
Net Absorption
Vacancy Rate
Average Asking Net Rent
(Per Square Foot)

2015 Q3

2015 Q4

8,899,480

8,913,419

8,915

28,655

3.99%

3.66%

$5.13

$5.40

Trend

Notable Sale

New Supply

Notable Lease Transactions

TENANT NAME & ADDRESS

TYPE

APPROXIMATE
SIZE (SF)

1. 623 Colby Drive

Headlease

18,195

2. 106 Randall Drive

Headlease

12,355

3. 483 Conestogo Road

Headlease

9,818

Notable Sale Transactions

PURCHASER & ADDRESS

Historical Performance and Forecast

9.0%

300,000

PRICE

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

COMPLETION

APPROXIMATE
SIZE (SF)

8.0%
200,000

7.0%
6.0%

100,000

5.0%
0

4.0%

Upcoming New Inventory

ADDRESS

3.0%

(100,000)

2.0%
(200,000)

Not Applicable

1.0%
0.0%
2010 Q1
2010 Q2
2010 Q3
2010 Q4
2011 Q1
2011 Q2
2011 Q3
2011 Q4
2012 Q1
2012 Q2
2012 Q3
2012 Q4
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3
2014 Q4
2015 Q1
2015 Q2
2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
2016 Q4

(300,000)

Net Absorption

New Supply

Vacancy Rate

Research & Forecast Report | Fourth Quarter 2015 | Waterloo Region / Industrial | Colliers International

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
markets 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.

Research & Forecast Report | Fourth Quarter 2015 | Waterloo Region / Industrial | Colliers International

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