Toronto May Have Too Much Supply Today, But It’s Well-Positioned for the Future

TORONTO, ONTARIO – The Toronto data center market is pretty idiosyncratic. It’s got an arena that doesn’t really mirror any other in North America – but you can understand it pretty easily by popping the hood. That’s why CapRE’s Canadian Data Center Summit in Toronto kicked off with a panel discussion titled Greater Toronto Data Centre Market 360: What Firms are Actively Developing, Investing & Why? And the first question that Moderator Scott Harper, Associate Vice President, CBRE Limited asked the panel was a critical one. What challenges exist when entering the Toronto market?

Strahan McCarten, President and CEO, eStruxture Data Centers was first to offer a response. “Look, our goal is to be a national data center provider. We started in Montréal, which is where our company was founded. And then we found something in Vancouver and we felt that it was an untapped market,” he recalled. “When I think about Toronto, it’s obviously very established. And if you’re going to be a credible national data center provider, then you’ve got to be in Toronto.”

data center summitHe then intimated that he would prefer, as an organization, to come into the Toronto market based on an acquisition or on the back of a very large client. “Because I think that adding more supply to this market right now…that would be tricky,” he explained. “It’s our market that has got a lot of supply right now. That in and of itself, the capacity is out of line with what the market needs. But that combined with rising Hydro rates and an unpredictable provincial election and with an unpredictable dynamic with respect to capital rates, is a problem. So my inclination would not be to come in and build additional capacity.”

Before concluding, McCarten stressed how does feel that Toronto is going to be positioned well in the long term. “But in the near term, especially for someone like us, we’d rather do it on the back of an acquisition, to acquire a base of customers on which we could grow, or move here with a group of customers,” he stated.

Next, J. Todd Raymond, CEO & Managing Director of fifteenfortyseven Critical Systems Realty, LLC, chimed in, offering some first-hand insight into this topic based on his firm’s recent entry into the metropolis. “We’re opportunistic acquirers of facilities as well. And that is really the driver [for us] here in Toronto,” he shared. “The opportunity to pick up a facility with an anchor tenant, with fiber down to 151 Front Street and elsewhere throughout metro Toronto and right through to Montréal, that was really the catalyst.”

“The ability to expand with the entitlements that we have at that site was really an asset-based view of the actual transaction opportunity,” he continued. “And then when we looked at the market and really did a deep dive on the greater Toronto market, we saw a lack of available capacity. This capacity was teed up and ready to go with 1 megawatt in our site and basically 3 ready to go and ready to be sold now, and the expansion capability beyond that, we felt it was an ideal transaction for us, in a market that seemed to be tightly constrained on capacity.”

For more from this panel, check out previous CapRE Insider Reports:

Banner Photo (L-R): Strahan McCarten, President and CEO, eStruxture Data Centers & J. Todd Raymond, CEO & Managing Director of fifteenfortyseven Critical Systems Realty