CALGARY — A new Q2 real estate report from Avison Young for the Calgary industrial market reveals industrial remains a preferred asset among investors, with Calgary situated as a preferred destination for future growth.
The report, released July 24, says limited inventory in the region will continue to sustain both lease rates and sale prices.
Quarterly investment in improved industrial properties rose in Q2, with the largest acquisitions coming from pension funds.
Relative to the frantic pace Calgary’s industrial market saw in 2022, says Avison Young, market activity in the first two quarters of 2023 decreased. Net absorption has levelled off from the record-breaking previous year as overall vacancy has risen.
The total vacancy rate in Q2 was 2.46 per cent, up 0.15 per cent from Q1.
There is a total of 5.25 million square feet under construction in the Calgary industrial market, with an additional 4.92 million square feet proposed.
The firm forecasts that as the market enters the back half of the year, the pre-leasing of several large warehouse completions will likely boost quarterly absorption. Vacancy is expected to maintain a slow and steady increase. Despite this, there appears to be a sustained level of demand, coupled with continued optimism in the city.
The deceleration in leasing activity seen in Q2 2023 was due to low vacancy and an inability to supply the market, not a lack of demand. Now that demand is easing, it is likely the market has seen the bottom of the trough, which should result in modest incremental rises in the overall vacancy rate moving forward, says the consultant.
Meanwhile, rising interest rates, coupled with high inflation and economic uncertainty, have led many institutional buyers to reevaluate their portfolio positions. It is anticipated investment levels will either level off or decline in the final two quarters of this year.
In sum, the firm says, limited inventory in the region will continue to sustain both lease rates and sale prices, which bodes well for Calgary’s industrial market.
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