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In April AMB Property Corp. signed 3M Canada, a wholly-owned subsidiary of St. Paul, MN-based 3M, to a pre-lease agreement for 309,000 sf at AMB Milton 401 Business Park near Toronto Pearson International Airport. GlobeSt.com took the occasion to query Jay Cornforth, the San Francisco-based REIT’s managing director, East Region, on the company’s views of the greater Toronto market, which boasts North America’s fourth greatest concentration of industrial space. As of Dec. 31, AMB’s Toronto portfolio totaled more than 2.7 million sf of facilities either operating or in development in a market with a total of 726.6 million sf. The company’s existing land holdings can support additional future development of another 1.5 million sf, for a portfolio total of 4.2 million sf.

GlobeSt.com: What initially attracted you to Toronto?

Cornforth: We really like the supply and demand equation. There’s very little land availability and a lot of discipline in the market. The vacancy rate has never gone above 6% in the last 10 years. We like the land constraints. We like the Trans-Canada Highway, which serves the entire nation.

GlobeSt.com: How aggressive have you been there?

Cornforth: We’ve grown very quickly over three and a half years, mostly through development. We acquired 1.5 million sf of buildings, but the rest we’ve developed or plan to develop. We’re a long-term owner, and our goal is to be a significant player. At four million sf, we’ve got a good presence, but we need to continue to grow.

GlobeSt.com: Given the market’s land constraints, isn’t it tough to grow there?

Cornforth: We It’s not really that difficult to acquire suitable sites. There are always opportunities through the acquisition of existing properties with development or redevelopment potential, particularly brownfields. It’s not like they’re out of land, but there are very strong constraints in terms of how quickly that land is brought on line. The regional authorities have decided there is not going to be rampant growth but slow and rational expansion. We like the infill story where rents grow at a faster clip because it’s difficult to develop new product.

GlobeSt.com: How is the market faring in terms of the downturn in the US economy?

Cornforth: We all recognize we’re in a bit of a tough economic market, but what Toronto has going for it is new construction is diminishing. It had nine million sf of completions last year. Our estimate is it will have six to eight million [sf] this year. AMB had a pretty good first quarter in Canada. Unemployment is low, and the Canadian dollar has been pretty strong. Plus, Canada has been significantly de-linked from the US economy, which has not been the case historically. It’s very much an independent market now.

GlobeSt.com: So Toronto is not competing with Chicago or other Midwest US markets?

Cornforth: I don’t see the linkage with the Midwest despite NAFTA and even the auto pacts. There are a lot of US auto plants in Southwest Ontario, it’s true, but in terms of distribution, Toronto is a stand-alone because it has such a big population base. It doesn’t make sense to distribute to Toronto from Chicago. I don’t see American companies pulling out of Toronto and saying we’re going to go to our main US distribution centers and distribute from there.

GlobeSt.com: What about building a presence in other Canadian markets?

Cornforth: We’ve been really disciplined, staying in the Toronto-west market. It’s possible we’d expand farther west, though I’m not sure we’d get out as far as London (Ontario). The only other city in Eastern Canada we have an interest in is Montreal. At some point, we’ll go there. We’ve looked at Calgary and Edmonton, but Toronto is our major focus, our growth engine, and the majority our portfolio will continue to be based in that city. It’s that big; it’s that important. In general, we let our customers decide where we go, and we don’t have the same customer base in Montreal, Edmonton or Calgary. One day our customers may take us to other cities, but not yet.

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