While the London industrial market did not see new supply this quarter, a healthy 787,000 sq. ft. of construction remains in the pipeline with all expected to be completed in 2021. This includes the 638,000 sq. ft. expansion to the Maple Leaf Foods poultry processing plant which is anticipated for delivery in Q1 2021 and will add 1,400 new jobs to the local economy.
As tenants withdrew from the market, occupancy decreased and resulted in 133,000 sq. ft. of negative net absorption. Likewise, availability increased by 30 bps to 2.1%.
Despite negative fundamentals, lease rates and sales prices experienced increases to $6.17 per sq. ft. and $75.95 per sq. ft., respectively.
Recent strategic investments from Ford, Fiat-Chrysler and General Motors at the close of 2020 has placed Ontario’s automotive industry at the centre of manufacturing’s high-tech transformation. With more than 100 companies serving the automotive industry, the London Region is expected to benefit from the $4.8 billion of investment into vehicle production and parts distribution across the province.
In contrast to larger Canadian markets, to date there have been no significant sublease listings that have come to market. This is a testament to London’s unique tenant industry mix as well as smaller average tenant size.
Overall office activity continues to be very slow with minimal movement in the market. Office users currently in the market are taking a cautious approach and spending considerable time evaluating their size needs and attempting to forecast future requirements. Although office demand is substantially limited, most of it has been seen in suburban areas.
Users who do not need to consider downsizing, relocation or termination continue to wait cautiously, with some continuing negotiations with their landlord on concessions and rent deferment. As many office tenants in London were either granted rent deferment, or are otherwise in arrears, it is possible London will see a spike in subleases in 2021 depending on national and local economic conditions. Landlords may have to face the choice of evicting their tenants, however, recuperating some revenue from the existing tenants may prove to be the better decision over facing vacancy in a market where demand has been minimal.