Industrial demand speeding up in Niagara, Ontario
The Niagara region in Ontario is experiencing a surge in demand for industrial real estate, driven by a combination of factors including the growth of the e-commerce industry, the rise in consumer demand for local and sustainable products, and the region's strategic location near major transportation networks. The trend has led to a significant increase in construction of new industrial properties and a rise in rental rates. For example in 2022 we saw the average net rent of $7.93 per sf, and the average net asking rate in 2023 is $12.93 per sf; a dramatic increase we predict will continue to rise.
E-commerce centre
One of the key drivers of this demand is the growth of the e-commerce industry, which has seen a surge in demand for warehouse and distribution centres. The Niagara region's proximity to major transportation networks such as the QEW and the Welland Canal makes it an attractive location for companies looking to set up distribution centres to serve the Greater Toronto Area and beyond.
Locally minded consumers
Another factor contributing to the demand for industrial real estate is the rise in consumer demand for local and sustainable products. As consumers become more conscious of their environmental impact, they are increasingly seeking out products that are made locally and sustainably. We have seen this lead to an increase in demand for manufacturing facilities and distribution centers that can produce and distribute these products. You may note this change in the stores you frequent on the small scale, but also in big box stores now including local products alongside national brands. This change is driving demand for small to mid-sized facilities in particular. Perhaps the most exciting change in the market we are experiencing.
Construction increases
The surge in demand for industrial real estate has led to a flurry of construction activity in the Niagara region, with many new properties being built to meet demand. This has resulted in a rise in rental rates, as landlords seek to capitalize on the strong demand for industrial space. The trend is expected to continue in the coming years, as the e-commerce industry and consumer demand for local and sustainable products continue to grow. This increase in construction is driven by the lack of inventory to meet demand. This is also influencing a rapid increase in the cost to purchase; the average sale price in 2022 was $164 per sf, now asking prices are well above $200 per sf.
These trends in industrial activity are expected to continue as Niagara continues its move to become a major hub for industrial activity in Ontario, offering opportunities for businesses and investors alike. In future posts I will detail a few specific projects contributing to this perception change of Niagara in other markets.