This has never happened in Canadian CRE before

by Steve Randall19 Jul 2018

For the first time the industrial property vacancy rate in Canada has fallen below 4%.

As demand from all industry sectors increases the availability of suitable industrial space is tighter than ever and developers are responding with a new wave of construction.

A new report from real estate firm CBRE shows that unit-starved markets such as Toronto, Vancouver, and Montreal are seeing an uptick in construction activity as builders respond to tight inventory and rising rents.

“As we carefully consider the ramifications of trade uncertainties between Canada and its closest trade partners, the heightened activity from all industry sectors is encouraging, with distribution, food and e-commerce leading the pack. As last mile delivery becomes increasingly important, tenants from these sectors are expressing interest to be closer to major Canadian urban centres in Toronto, Vancouver and Montreal. However, with limited product available, many users are reverting to suburban options,” commented Werner Dietl, EVP and GTA Regional Managing Director at CBRE Canada.

Across Canada, positive net absorption in the latest quarter was up 29.4% quarter-over-quarter to more than 6.6 million square feet while new supply was 3.9 million sqf.

The construction of new industrial units has surged 47.1% quarter-over-quarter to 19.4 million square feet.

“Availability in Canada’s major industrial markets continue to plummet, which is putting pressure on tenants. However, it’s important to remember there is still 70.6 million sq. ft. of available industrial space in Canada. While tenants still have options, the game has changed and it is important to identify a property’s potential and be able to make an offer quickly,” added Dietl.

Regional hot spots
Toronto remains the tightest industrial market in North America at 2.2% availability, the lowest on record, followed by Vancouver at 2.4%.

In these cities rents have increased to new record highs with an 8.3% year-over-year rise in Toronto to $6.55 per sqf and Vancouver soaring 26.1% to $11.59 per sqf.

In Montreal, availability of industrial space hit a 16 year low of 5.3% with absorption outpacing supply by almost 6 times.

“Availability in Canada’s major industrial markets continue to plummet, which is putting pressure on tenants. However, it’s important to remember there is still 70.6 million sq. ft. of available industrial space in Canada. While tenants still have options, the game has changed and it is important to identify a property’s potential and be able to make an offer quickly. Like the residential real estate market, it is common for all types of industrial properties, regardless of clear height, to have multiple purchase or lease offers on the table. Tenants, big and small, need to be nimble, strategic and be ready to jump on opportunities that suit their needs,” said Dietl.


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