What's next for the Calgary industrial market?

The region continues to labour under sustained pressure from market demand

What's next for the Calgary industrial market?

Sustained pressure and a development pipeline scrambling to meet that demand continued to reverberate through the Calgary industrial sector during the first quarter, according to Avison Young.

Total industrial vacancy rate ticked up by 0.09% on a quarterly basis to settle at 2.31% in Q1, while the availability rate went up by 1.1% to reach 4.14%.

As of Q1, nearly 6 million square feet (msf) of industrial space is currently under construction across the region, with an additional 5 msf proposed.

“It is anticipated that the bulk of this year’s new construction deliveries will occur in the 3rd and 4th quarters, helping to alleviate some of the pent-up demand,” Avison Young said.

“While vacancy rose slightly in the first quarter along with a drop in absorption levels relative to the previous two quarters, the pace of demand and leasing activity indicates that this may only be a temporary reprieve. At the current pace, the market is not expected to approach equilibrium until at least some time next year.”

However, while Q1 investment levels benefited from the unusually strong momentum imparted by last year’s market performance, “many of the largest sales occurred early in January,” Avison Young said. “As such, it remains to be seen if signs of stagnating capital investment will reach Calgary’s industrial sector.”

Another factor that could affect investment levels is the possibility of an economic downturn this year.

Despite this risk, “compared to other major markets across the country, Calgary continues to provide a competitive advantage with its relative affordability and plentiful supply of vacant land,” Avison Young said. “Demand originating from across the country and beyond is likely to continue as investors looking for a secure and stable return look to industrial as a preferred asset class.”

“Calgary continues to benefit from greater trends and themes playing out in the CRE sector, and early indicators show that the industrial market is headed for another strong year.”