Vacancy decreasing in Calgary industrial real estate market

Absorption - the change in occupied space - increased by 768,252 square feet in the fourth quarter of 2019, bringing yearly total to 2.4 million square feet

Calgary’s industrial real estate market experienced a stable fourth quarter in 2019 with vacancy decreasing three basis points to 6.04 per cent, says a new report by Colliers International.

The commercial estate firm said the market remains slow but absorption – the change in occupied space – increased by 768,252 square feet in the fourth quarter. 

“Throughout 2019 there has been steady positive absorption from leasing and sales activity, especially in the medium-bay segment of the market,” said the report.

“Activity in large-bay product remained slow, while the small-bay segment saw an increased number of bankruptcies, resulting in increased availabilities. As commercial tax rates have jumped by 24 per cent in the past from years from 0.0177 per cent to 0.0220 per cent, it is evident that some small local tenants are having trouble staying operational.

“We continue to see disparities amongst landlords, as there is a wide range of asking lease rates for very similar real estate. This range can be upwards of a few dollars per square foot in the small and mid-bay markets, and expresses that some landlords are more motivated than others to increase activity in their respective portfolios.”

Colliers said availability rates in the market remain high at 9.70 per cent, which is down from 9.98 per cent in the previous quarter.

The report said it is expected that more landlords will be forced to reduce their rates in order to stay competitive in a market that has experienced 6,423,936 square feet of new supply over the past 24 months. There is also 982,000 square feet of supply under construction.

“Calgary remains a strong market for regional distribution and logistic companies and as such, there is an abundance of newly-constructed large-bay inventory ready to meet the anticipated demand. Attractive factors for tenants include the variety of newly-built product, low rental rates, when compared to other major Canadian cities and location. All of these elements support Calgary’s growth as a significant Western distribution hub,” said Colliers.

“Our outlook into 2020 continues to be positive, as absorption is expected to catch up to the oversupply of new construction experienced in the previous 24 months. Vacancy and availability rates are projected to trend downwards as tenant interest continues to gain momentum throughout Calgary’s industrial market.”

Mario Toneguzzi is a business reporter in Calgary.

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