Going west: Developers plan major new industrial projects in red-hot Kanata market

David Sali

April 3, 2023

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More than half a million square feet of industrial space is in the works at two sites in west Kanata as developers scramble to satisfy demand for warehousing and light-manufacturing facilities in the city’s tightest submarket. Montreal-based developer Rosefellow says it hopes to start constructing a pair of industrial buildings later this fall on a 21.4-acre parcel of land at 405 Huntmar Dr., north of the Tanger Outlets mall. The company’s plans call for a 230,000-square-foot distribution and warehouse facility and another building covering 248,000 square feet at the prime development site, which is fully serviced and zoned for general and light industrial use. Rosefellow bought the property, which is located just a few hundred meters from Highway 417 and the Canadian Tire Centre, from the Taggart Group of Companies last year for $25.7 million. Mike Jager, the Montreal firm’s co-founder, said the site’s proximity to major transportation routes makes it an ideal home for logistics companies looking for distribution space. In addition, he noted it’s easily accessible to nearby restaurants and retail amenities such as the Tanger mall and is just a short distance from several residential developments. “This site, when it came up, we said, ‘We’ve got to find a way to acquire it,’” Jager told OBJ on Monday. Rosefellow is hoping to receive final site plan approval from the city shortly and aims to have shovels in the ground by October, with occupancy slated for late 2024. The company is developing the project on spec. Jager says he has no worries about filling the buildings, which will each include 28 loading docks and feature 32-foot ceilings. “Businesses don’t have three years (to plan),” he said. “When they decide they need more space, they need it within the next six months. “Vacancy is so low in that market now that we believe by the time we’re done construction on both, we should be at about 80 per cent leased,” Jager added. “We’re going to see huge demand for that space.” The latest Ottawa industrial market report from Colliers International seems to support Jager’s upbeat outlook. According to the report released Friday, the availability rate for industrial space in the Kanata/Deep West submarket in the first three months of 2023 was 0.6 per cent, down from 1.1 per cent in the fourth quarter of 2022. Meanwhile, average asking net rents in the Kanata area have jumped from $13.10 per square foot a year ago to $18.65 in March. Ottawa real estate executive Dominic Bonin points to a couple of factors that are fuelling demand for west-end industrial space. Bonin, the vice-president of asset management for Guelph-based Skyline Industrial REIT, says some clients that have traditionally set up shop in the east or south ends of the city are establishing satellite operations farther west to service customers in Kanata and growing nearby communities like Stittsville. Other tenants, meanwhile, are gravitating toward new developments like Rosefellow’s in a “flight to quality” as they vacate aging properties with lower ceilings and fewer amenities. Bonin, whose firm is an investor in the Kanata project, said the new buildings will provide a “pure industrial option” for customers such as building supply companies, HVAC operations and tech firms looking for warehousing and light manufacturing space. With high ceilings, large bays and plenty of parking, the project will be designed to accommodate a wide range of potential tenants, Jager added. “This kind of checks off those boxes,” he explained. Skyline REIT has the option to purchase the buildings outright and will likely do so once they’re fully leased, Bonin said. The real estate investment trust once owned more than a million square feet of small-bay industrial space in Ottawa but sold its last remaining property on Hunt Club Road last month. “This is giving us a great opportunity to acquire class-A, modern industrial real estate,” said Bonin. “There’s never a lot of opportunities to acquire that quality of an asset in this market.” As Ottawa continues to ride a wave of demand for logistics space from e-commerce giants like Amazon, Rosefellow and Skyline are also teaming up on another project in Barrhaven. Last year, the firms bought a 21-acre site at 545 Dealership Dr., east of Highway 416 and a few blocks south of Amazon’s 2.8-million-square-foot fulfilment centre that opened in 2021. Jager says Rosefellow wants to erect a pair of 150,000-square-foot industrial buildings at the Barrhaven property, which is just south of the 50-acre site where Ottawa-based Colonnade BridgePort plans to construct its four-building Gateway Industrial Park. “We love the market,” said Jager, whose firm also built the new 532,000-square-foot Ford distribution centre in Casselman, which it recently sold for nearly $117 million. “As long as vacancy rates are lower, and if demand is high and we can still acquire sites at a reasonable price, then we’re definitely all in.” Meanwhile, another local builder is laying the groundwork for an industrial project in Kanata not far from Rosefellow’s development. SpaceWerx Corp. president Jeff Moffatt says his firm aims to start construction this summer on a 56,000-square-foot building at 101 Nipissing Ct., just west of the Tanger Outlets mall. Like Jager, Moffatt said he believes the three-acre site is an ideal fit for light industrial tenants that need quick and easy access to the Queensway. “You’re literally 45 seconds from the highway,” Moffatt said. Moffatt said he’s hoping the single-level structure, which will have 30- to 32-foot ceilings, will be completed by next summer. He said the development is drawing interest from tech companies looking for light manufacturing space as well as plumbing, heating and HVAC firms that need warehouse and distribution facilities. “Those kinds of service industries that need warehouse space, that have trade customers but also have some consumer-facing business, we’re seeing a lot of that activity,” Moffatt explained, adding more than half of the building is already pre-leased. While the Amazons of the world eat up huge swaths of real estate at multimillion-square-foot distribution centres, Moffatt said much of the demand for sites like his is being driven by smaller tenants who require between 10,000 and 30,000 square feet of space and want modern amenities. “They don’t need a massive building – they just need enough to serve their needs,” Moffatt said. “A lot of our inventory in this city is dated. It’s low ceiling, it’s not super-efficient, it’s kind of located in business parks that are not really amenable to fulfilment and last-mile kind of uses.”