Montreal’s BTB REIT bullish on Ottawa industrial sector as firm pulls trigger on $12.5M buy

A Montreal-based real estate firm has acquired a second industrial property in Ottawa and is shopping for more warehouse and other commercial space in the region as it looks to shift its portfolio away from retail holdings.

BTB Real Estate Investment Trust has agreed to purchase a 46,000-square-foot building at 1100 Algoma Rd. in Gloucester from Crestpoint Real Estate Investments for $12.5 million. The deal, which will see BTB pay $4.4 million in cash and finance the rest by taking out a new mortgage on the property, is expected to close on April 4.

Built in 2007, the two-storey building has a single tenant, Ontario Medical Supplies, which rents the entire facility on a long-term lease. 

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BTB REIT president Michel Léonard said the 3.5-acre Algoma Road site also has room for an additional 15,000 to 20,000 square feet of industrial space, and the firm hopes to expand the property in the near future.

BTB, which was founded in 2006 and trades on the TSX, made its first local acquisition in 2012.

Lansdowne Park properties

Earlier this year, the REIT acquired two office buildings at Lansdowne Park. Factoring in the latest deal, its portfolio in the National Capital Region now includes about 700,000 square feet of total space at nine office buildings and two industrial properties.

Léonard said the firm is aggressively pursuing industrial buys as part of a plan to redistribute its holdings. Currently, about one quarter of its more than 70 properties across Canada are industrial buildings, but the company hopes to boost that share to about 50 per cent as it divests some of its retail holdings.

Noting that industrial space is at a premium all over Canada, Léonard said BTB’s unitholders see significant growth potential in the sector. 

“Part of our vision is to acquire more and more industrial properties. It really fits our bill and it’s right where we want to invest.”

He said the pandemic-fuelled e-commerce boom has caused demand for warehouse space to spike, adding the COVID-19 crisis also exposed a lack of domestic production capacity for pharmaceuticals and manufactured goods that’s triggered a push for construction of new industrial facilities.

“Part of our vision is to acquire more and more industrial properties,” Léonard told OBJ on Wednesday. “It really fits our bill and it’s right where we want to invest.

“I think that we’re going to see some of those (new facilities) sprout in Canada over the next few years. I think it’s just the beginning of not only the investment in industrial, but the deployment of industrial properties.”

Ottawa is among many Canadian cities now facing an industrial space crunch. Demand for industrial buildings has skyrocketed in recent years amid an online shopping boom that’s turned the National Capital Region into a thriving e-commerce distribution hub.

With virtually no new construction projects on the books, national real estate brokerage CBRE is predicting the city’s industrial availability rate will fall below one per cent this year while net asking rents – already at record highs of more than $12 a square foot – will soar above $13 by the end of 2022.

Deals ‘few and far between’

All of which makes industrial space in the capital an attractive investment – if you can find it. Léonard said he’ll be keeping a close eye on the Ottawa market for deals in the REIT’s price range.

“It’s definitely something that we’re after,” he said of local industrial properties. “They’re few and far between. When we’re able to negotiate (a purchase) that is at the right price that is accretive to us, then we’re going to jump on it.”

Meanwhile, the firm is also looking to add to its office holdings in the city’s suburbs. 

As part of its $22-million purchase of a four-storey office building near Highway 417 and Greenbank Road two years ago, BTB also acquired a parcel of land next door that’s zoned for up to 60,000 square feet of additional office space. 

The REIT is now putting out feelers for potential tenants to occupy a new building it hopes to eventually construct on the property.

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