Calgary industrial vacancy increased in fourth quarter

CALGARY, ALTA. – A new Avison-Young report details how Calgary industrial vacancies rose due to substantially complete construction meeting demand.

Vacancy rates moved upward through 2023, including 2024, with the vacancy rate increasing to 3.6 per cent, a release stated. At this point last year, a surge in demand had vacancy at 2.2 per cent.

“Much of the new construction anticipated this year was delivered in Q4, amounting to 3.9 million square feet of new inventory. These deliveries helped ease the strain on the supply side and move the market more into balance,” the release said.

A majority of positive absorption in Q4 took place in pre-leased new construction and pre-leasing of new builds remains a significant factor with 35 per cent of Q4 new deliveries being preleased. Approximately 50 per cent of properties under construction have also been leased, the release said.

A constriction in the availability of small-bay product is a continuing theme, the release said.

“With e-commerce and last-mile logistics driving demand for large distribution centres, developers have mostly been focusing on these types of projects. However, with a record amount of people moving to the province in 2023, small business growth is inevitable, along with demand for small-bay industrial warehouse and workshop space. Pressure on this segment of the market will drive vacancy rates lower and rents higher,” the release stated.

The report predicted supply constraints will continue to ease as more projects are completed and brought to market, and upward pressure on rental rates will continue. It also cautioned relatively low costs will keep Calgary in favour for those looking to relocate or expand business from more expensive markets.

“The cost of capital will continue to be a challenge for developers, investors, and tenants alike as the greater economy looks to correct its course in 2024,” the release concluded.

The full report is available here.