This fall, Angstrom Engineering Inc., of Kitchener, Ont., will move into a 53,000-square-foot building in a new tech-oriented business park 10 kilometres away, ending a prolonged effort by the fast-growing company to buy industrial property.
Rising demand and shrinking supply of serviced industrial land in the Waterloo Region (which includes Cambridge, Ont.) have tested companies such as Angstrom and others competing for property in one of the country’s hottest industrial markets. The COVID-19 pandemic, supply chain disruptions and dwindling inventory of municipal industrial parks contribute to the current squeeze.
Three years ago, Angstrom officials looked for 20,000- to 30,000-square-foot buildings but, with company growth, broadened their search to facilities of 50,000 square feet. What they found, says Angstrom president David Pitts, was “almost nothing in that 30,000- to 50,000-square-foot size … It was challenging.”
If you can attract the best talent to the area, you will attract very good corporations. That war for talent has come to the industrial marketplace, especially in advanced manufacturing.— Mark Kindrachuk, president of Intermarket Properties
His experience is familiar to Waterloo Region realtors.
“I joke that over the 30 years of my career, for the first 25 to 27 years, I was trying to drag people out of Toronto to look at Kitchener-Waterloo, saying, ‘Please come and have a look and buy something,’ ” quips Karl Innanen, managing director of Colliers International in Kitchener. Given “the spillover effect” from Toronto-area demand, he says, “for the last two to three years, I’ve felt like a bouncer at a big party trying to keep them out.”
In the fourth quarter of 2021, industrial vacancy in the Waterloo Region fell to 0.7 per cent, according to a report by Colliers, given demand from local and out-of-town land buyers. Average asking net rents increased to a record $8.51 per square foot in the final quarter of last year (up 23.5 per cent over the same period in 2020).
Last fall, for the first time, the cost of some industrial land crept above $1-million per acre, spurred by COVID-19 disruptions, causing manufacturers and suppliers to relocate some of their production from abroad back to Canada.
At Angstrom, which designs and builds machines that create nano-film materials used to research the evolution of everyday products such as cellphones and batteries, as well as high-technology products, the search for new quarters predated the pandemic.
“The main driver was growth, and we needed more space,” Mr. Pitts says.
As the company outgrew its 15,000-square-foot facility in Kitchener, Mr. Pitts says Angstrom was determined to stay in the area for its existing work force and its links to skilled graduates from the region’s postsecondary institutions.
In early 2021, Angstrom purchased a five-acre parcel in Cambridge IP Park, an industrial campus developed by Toronto-based Intermarket Properties to attract companies in advanced manufacturing, research, distribution and logistics.
Unlike some newcomer developers, Intermarket Properties president Mark Kindrachuk dates his involvement in the Waterloo Region to 2001. Over a 12-year period, he and business partner Sandy Acchione assembled 400 acres of land for their industrial park in the north end of the city.
Over the past two years, Intermarket sold a significant portion of its 400-acre IP site to various developers, including the Healthcare of Ontario Pension Plan, Montreal-based Broccolini, and First Gulf, of Toronto. Intermarket retained 85 acres to develop and lease buildings for smaller-scale industrial users, not planning further property sales.
However, Angstrom purchased five acres in IP Park because Mr. Kindrachuk saw a fit with his plans for an amenities-rich industrial campus for high-tech and related firms. Those amenities include green space, walking trails and bike trails integrated into existing woodlots and creeks, key features of a master plan developed by Intermarket and the city of Cambridge.
“Our position is that if you can attract the best talent to the area, you will attract very good corporations,” Mr. Kindrachuk says. “That war for talent has come to the industrial marketplace, especially in advanced manufacturing.”
Given low vacancy rates, Mr. Kindrachuk is so confident he can bring in the firms he wants that his company will begin construction in May on a 100,000-square-foot building, possibly for a data centre, without signed tenants yet. Other buildings are scheduled for construction later this year.
Meanwhile, the pandemic-fuelled land squeeze led some companies to modify their acquisition strategies.
Eclipse Automation, based in Cambridge but also with operations in the United States and Europe, designs and builds complex automated systems for a variety of medical, transportation and clean-energy products.
Land was readily available when Eclipse opened in 2001, says president and co-founder Steve Mai, who made regular purchases in the Cambridge area to keep pace with company growth.
But escalating land prices over the past three years made it difficult to buy or lease the right buildings in a timely manner. “We have to fight for our real estate now,” says Mr. Mai, whose new strategy is to buy property well head of immediate needs.
“I have to entertain whatever comes available in the market at an inappropriate time for my business but appropriate for my [company’s] future,” he says.
The supply-demand pressure comes as municipalities no longer buy land for industrial parks. Cambridge, for example, sold its last inventory of industrial lands two years ago with no plans to acquire new supply, says economic development director James Goodram.
“The private sector is doing that now and they have really come in [to the region],” he says.
Mr. Goodram says municipalities now play a supporting role by installing water, waste and other services for privately held industrial lands, recouping those costs through development charges.
Currently, the city is assisting in the development of 400 acres of employment lands in north Cambridge and in Waterloo. Half of the developer-owned acreage is already serviced, with the other half expected to be ready later this year, says Mr. Goodram.
For Angstrom’s Mr. Pitts, relief is in sight. “We are looking forward to getting into the new space that is purpose-built for us.”