Hyperscale Data Centre Developers Descend on the GTA

The Greater Toronto Area is abuzz with data centre-related activity as heavy-duty users and cloud providers invest significant capital to secure sites for hyperscale developments in Canada's largest market.

And they’re paying all-time high prices for big swaths of land for their projects. “Large sites are going rapidly, and the price doesn’t matter,” says CBRE Vice President Scott Harper, who specializes in data centres. “This is one sector that is showing no sign of letting up as interest rates rise or relenting in the face of land scarcity and rising construction prices.”

One large cloud provider secured $43 million of land in Etobicoke and Vaughan to design and build two new hyperscale data centre campuses by themselves, versus leasing the infrastructure from a third-party developer, which has been the traditional way of doing things in Toronto.

Stack Infrastructure launched a partnership with First Gulf to develop a 56 MW campus on a 19-acre site at 3650 Danforth Avenue in Toronto, Stack’s first international expansion.

Another large cloud provider has acquired Urbacon’s 310 Humberline in Etobicoke, a 117,302 sq. ft. facility, and now occupies 16 MW at the site.

And there are more deals to come. “The level of commitments this year could blow everything before them out of the water,” says Harper. “We’re going to be at a high-water mark. It’s explosive growth.”

Act Fast

Challenges loom, though. Demand for industrial developments in Toronto makes building and land scarcity a hurdle for those planning new data centres larger than 15 acres.

“We’re seeing record high land prices for the properties that are available, and the needle is moving constantly,” says Harper. “So we’ve been telling our clients: to do what you want to do now, find someone who is moving and buy their land at a premium. We have an offer offer north of $100 million for an existing industrial user campus, so they can clear out and move to another site. There’s an intense need and significant capital backing data centers – they’re going to happen one way or another.”

“You’ve got hyper-scalers coming from all over trying to do deals,” Harper adds. “But it’s hard to do a small deal here, because the land pricing makes it so difficult to do that efficiently. So everyone is looking for big deals.”

Infill Solutions

Infill projects are a possible way forward. Compass Datacenters is building a two-storey facility for Microsoft at Islington Avenue and Highway 401 in Etobicoke, replacing a vacant single-storey Lowe’s hardware store and surface parking lot. The proposed building will be 278,000 square feet, and it made headlines for its barcode-inspired façade design.

But infill conversion sites often can’t offer the scale that hyperscale cloud providers are seeking, says Harper. “Most won’t take a deal unless it can accommodate 30 MW, which requires a building that’s 200,000 sq. ft. minimum.”

Construction of these massive centres is another huge challenge in the current climate of labour shortages and supply chain disruptions.

“These are significant construction projects and we don’t have the labour or skill set to build them right now,” says Harper, noting that an office building is about $450 per buildable foot versus a data centre, which costs $1,200 per buildable foot. “So these planned projects will monopolize the trades for a while and likely cause further inflation in construction prices.”

It can be a tricky market for those looking to launch hyperscale developments. But Harper and his team are the best connected and equipped to successfully navigate the ever-evolving GTA data centre landscape.

“The next few years are going to completely redefine the Toronto data centres market,” he says. “And we’re excited to be at the heart of the action.”