NextStar dispute put short

The otherwise hot Windsor industrial real estate market took a bit of a breather in this year’s second quarter due to uncertainty over the outcome of the NextStar Energy battery plant negotiations.

Lease rates dipped 5.1 per cent or 11 cents per-square-foot to $9.24, but sales of industrial property rose to a record-high $172.10 per-square-foot.

Overall, the 21.9 per cent increase in average local sales prices was the second-highest in Ontario and fourth-highest in the nation during the second quarter.

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“The second quarter was impacted by the battery plant issue coming up,” said CBRE Windsor associate vice-president Brad Collins.

“We really did see a cautious approach. There was a slowdown in touring activity and people looking at properties.”

However, Collins said the concerns weren’t enough to result in any discounts in pricing. He noted the availability of locally zoned industrial lands remained flat.

The current availability rate is 3.3 per cent, but that figure was inflated by the addition of one property last fall.

The former 750,000-square-foot Syncreon facility is available for sublease from Stellantis, but is too large for most medium-sized and smaller firms. Without that facility in the mix, the availability rate is two per cent.

“Interest was a little soft among medium and smaller-sized companies in the quarter, but the tier ones remained active despite the battery plant dispute,” Collins said. “They were driven by retooling and contracts awarded by Stellantis.

“The large companies were looking for new space or expanding. There are at least half a dozen local ones that had real net growth.”

CBRE Windsor senior vice-president Brook Handysides said the sales side is more buoyant despite higher interest rates isn’t a surprise.

The Windsor market is heavy with long-established manufacturers who tend to prefer the stability of owning their own production facilities.

“There’s a lot of competition for the industrial space available to purchase,” Handysides said. “That put upward pressure on prices.”

Handysides also noted the Windsor market is showing great resiliency and less volatility in comparison to other markets. He credits the record industrial investments and other major construction projects in the area for offering some insulation against the economic headwinds of a slowing economy.

“We also continue to be a well-priced market relative to markets across Canada,” Handysides said. “We’re in single digits on leasing rates.

“However, I think it’s important to note industrial land is seeing real price growth. The average price for one acre of industrial land will hit the $500,000 range in the near future.

“With it in short supply, it limits the options to find significant-sized tracts of land.”

Handysides is expecting things to get tighter in the second half of 2023 with the battery plant issue resolved.

There is currently 377,000 square feet of new space under construction, but that space is already spoken for. And that figure doesn’t include the battery plant or the Amazon warehousing site that is seeing some preparation work done for an expected 200,000-square-foot facility after a year’s delay.

The amount of new space under construction in the next 12 months is expected to balloon as suppliers begin to cluster around the battery plant.

“We’ve seen a lot more tenant activity in the past three weeks,” Handysides said. “There’s a lot more touring going on and that is always a real harbinger of the level of deal making activity to expect in the coming months.”

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