After the former Budd Automotive parts maker closed in 2008, the sprawling 70-acre site in Kitchener, Ont. had to wait for its makeover.
Over the past decade, the property received an $8.6-million environmental cleanup, but plans for big-box retail and other development never materialized. This year, with new owners, the property’s focus is back on industrial users who, in today’s digital economy, put a premium on access to skilled workers in deciding where to locate.
To that end, the evolution of the former Budd lands is a lesson in patience – and good timing.
With COVID-19 disruptions to global supply chains over the past year, the inventory of prime industrial properties has shrunk, causing a sharp rise in lease rates. In the Region of Waterloo, which includes Kitchener, industrial market vacancy rates fell to “an all-time low of 1.3 per cent” in the second quarter of this year, according to Colliers International, with rents up almost 5 per cent over a year ago.
In April, Perimeter Development Corp., which has made its mark in office and retail development in Kitchener and Waterloo, announced a joint venture with Crestpoint Real Estate Ltd., to purchase 37 acres of the Budd property for a new industrial business park. Soon after, furniture maker Krug Inc., purchased 23 acres of the site adjacent to some of its current operations. The remaining 10 acres of the Budd site will be aside for a stormwater management pond.
Perimeter chief executive officer Craig Beattie says his company had its sights on the property for a couple of years for the location at Homer Watson Boulevard and Bleams Road: close to Highway 401, residential housing and retail amenities. On the opposite side of Homer Watson is a long-established business park and a popular urban woodlot.
Beyond the location – a rare in-fill opportunity in an established neighbourhood – Mr. Beattie says, “the part we are the most excited about is its proximity to a terrific work force.” With two local universities and a trades college, he says, graduates are in high demand by a growing number of advanced manufacturers and startups in Waterloo region.
What has been true for the office sector, he says, now applies to industrial employers: “It is all about talent.” Perimeter aims to attract light manufacturing, logistics and technology companies to the now-named Homer Watson Business Park slated to open in fall 2022.
At Krug, the future park’s next-door neighbour, recruiting skilled workers also figured into its decision on where to consolidate currently scattered operations and allow for expansion.
Krug president Len Ruby says his company looked at potential sites for two years before concluding the Budd property fit the bill. “We took a closer look and really started to like what we saw,” he says, with its location a recruitment tool.
“We have to invest in a substantial amount of training and learning, which takes years,” he says. “We want to retain people and attract good-quality people; it is a war for talent, even in what we do.”
This fall, assuming Kitchener approves, Krug expects to renovate two existing buildings (82,000 and 52,000 square feet, respectively) on its newly acquired site. “Having those structures will enable us to get in more quickly than building from scratch,” says Mr. Ruby, a bonus given rising steel and construction costs.
Assuming city planning consent, Perimeter plans to prepare its site this fall to construct three buildings (60,000, 150,000 and 500,000 square feet, respectively), with occupancy, starting in late 2022.
Mr. Beattie, who has previous experience in industrial development, says the buildings will be constructed to Leadership in Energy and Environmental Design standards, potentially making them the first new industrial buildings in the region with some level of “green” certification.
“It goes back to the talent piece,” he says, with workers increasingly selective about where they work. “Those workplaces that provide some great amenities, people choose to work there.”
As neighbours, Perimeter and Krug plan to collaborate on signage, landscaping and possible worker-friendly amenities, such as showers for cyclists, developing a brand for the overall site.
Availability of skilled workers has become a “consistent conversation” in location decisions for industrial users, says Ted Overbaugh, senior vice-president and managing director for CBRE Ltd., the listing agent for Perimeter’s business park.
No matter the user or location, he says the same questions arise: “What is the access to labour?” and “Can we supply the labour and talent we need?”
The demand for qualified workers comes amid a “skyrocketing” demand for industrial spaces, says Ryan Mounsey, supervisor of economic development for Waterloo region.
He says the Perimeter development, the latest in “a whole new series of projects” rejuvenating vacant manufacturing properties in the region for high-tech tenants, “shows that older industrial sites can be repositioned over time for today’s new economy.”
For companies unable to find a location with existing and repurposed inventory, he adds, “emerging greenfield sites provide another opportunity.”
He cites the current phased development of a 400-acre industrial campus on the east side of Waterloo region, estimated to add between three million and four million square feet over the next several years. Meanwhile, several of the region’s municipalities look to expand their inventory of industrial lands to capitalize on demand.
For Kitchener, which applied a tax rebate program to facilitate the environmental cleanup of the former Budd property, its pending renewal marks a significant milestone.
“From our perspective, we have land that was sitting dormant for 12 years and wasn’t generating property tax revenue or generating new employment,” says Brian Bennett, manager of business development for Kitchener’s economic development department.
“Bringing this land into production will create new tax revenue, as well as new employment and provide opportunities for companies that want to expand or locate in Kitchener.”
As for the time taken to find new uses on the former Budd site, he emphasizes the need for patience. “Good things will come, but you have to be patient.”