Calgary’s Business: What’s the current vacancy rate in Calgary’s industrial real estate market and how does it compare to a year ago and historical rates?
Johannesen: Currently the industrial vacancy rate in Calgary sits at 7.5 per cent, down from 8.9 per cent one year ago. Historically over the past 3.5 years, the rate has fluctuated from a low of 4.3 per cent in the first quarter of 2015 to a high of 8.9 per cent in the second quarter of 2017.
CB: What about absorption and construction?
Johannesen: Absorption has been positive over the past four quarters with just over 1.9 million square feet being absorbed. With the momentum of the positive absorption, a number of new industrial projects have been kicked off in 2018. There is 1.8 million square feet of new construction currently under development that will be added to the industrial inventory this year.
CB: What are the main factors currently impacting the industrial market?
Johannesen: Overall it’s property efficiencies that are having the biggest impact on the industrial market. From the conversion trend of repurposing older generation buildings to industrial condominiums in the more mature areas, to the new developments with improved features and amenities, it all breaks down to efficiencies. A higher and better use, access to improved transportation routes, proximity to intermodal facilities or air freight and logistics networks. The decisions are all driven by being more efficient.
CB: What segments of the market are particularly strong now, as well as those that are weak? And why?
Johannesen: E-commerce and the changes to the retail supply chain distribution network seem to be having the biggest positive influence in the market. The users and occupiers are demanding more from their real estate decisions and continue to grow and to push the latest trends. The manufacturing and fabrication segments seem to be more sluggish and are more affected directly from the challenges in the energy sector and political uncertainty.
CB: What’s your forecast and why for the market going forward?
Johannesen: I think the influence from the periphery areas will continue to grow and have a greater impact on the overall market. There is a substantial gap in taxation and other savings for companies that are willing to relocate outside the city’s boundaries. A lot of the infrastructure has been put in place and there continues to be an increasing willingness for groups to locate in these areas.
– Mario Toneguzzi