On the ground at Toronto's industrial backbone
A field note from two days inside the warehouses, cross-dock terminals, and last-mile facilities that move what the Greater Toronto Area buys.
Tuesday morning, 6:40 a.m., a service road off Highway 401 east of Pearson. The convoy of trailers is already two hundred deep. The cross-dock terminal we have come to see is in its third shift change of the night, and the operator wants to walk us through before the cycle restarts at seven.
This is the industrial backbone of the Greater Toronto Area. Most of the families who live here have never seen it. We came to spend two days looking, because numbers on a screen tell you what an asset is worth — not what it does.
What we walked through
Eight assets across two days. Three were existing positions in our real-estate debt book. Five were prospective additions we have been tracking. Type breakdown:
- Two cross-dock distribution terminals
- Three large-bay warehouses (over 400,000 sq ft)
- Two last-mile delivery facilities
- One light manufacturing facility
What we noticed
A few observations that didn't make the financial models.
The clear-height conversation has finished. Five years ago, the marquee question on every new lease was clear-height — how high the ceilings sit, and therefore how many pallet positions a tenant can rack. Today, clear-height is a settled question. New construction is at 40 feet. The interesting question has moved to power. A modern distribution facility needs a kind of electrical infrastructure that only a few of the older buildings can retrofit at reasonable cost.
Last-mile is now a different asset class. The 80,000 sq ft buildings near the urban core that we used to think of as obsolete industrial have re-emerged as premium last-mile facilities. They are not warehouses any more. They are urban logistics hubs. Rent is double. Tenant credit is mixed.
Labour is the constraint, not space. Every operator we spoke with said the same thing. The bottleneck on growth is not square footage. It is the supply of trained material handlers within a thirty-minute commute. The implication for property selection is straightforward — assets sitting along transit lines now command a measurable rent premium that almost no underwriting model captures.
What we are doing about it
The visit confirmed two existing positions and raised our concerns about a third. We expect to make one new commitment in the next sixty days, in the last-mile sub-category. We are likely to pass on two of the five prospective assets — both of them on the basis of power infrastructure that would require capital expenditure we did not see priced into the cap rate.
Why we went
You cannot underwrite real estate from a screen. We will keep walking the buildings, talking to the operators, and writing what we see. It is the cheapest research we do and, often, the most useful.