The Calgary industrial real estate market had just over 3.9 million square feet in the construction pipeline at the end of the third quarter, the second largest amount recorded since an historical high of 5.2 million square feet in the first quarter, according to a new report by CBRE.
Of the total square footage under construction, CBRE said more than 85 per cent or 3.3 million square feet is being built on spec for single or multi-tenant users.
“Additionally, developers are catering to building features that larger format tenants are demanding, including 36-foot ceilings, wider column grids, LED lighting and dedicated trailer parking,” said the report.
In addition to the inventory under construction, an estimated 8.9 million square feet of industrial product is planned and expected to begin construction over the new few years, it said.
“Calgary’s industrial market posted its seventh consecutive quarter of positive absorption with 1.86 million square feet recorded,” said CBRE. “This represents the most robust quarter witnessed since Calgary’s historical high of 3.09 million square feet set in Q2 2006.”
Because of the surge in absorption – the change in occupied space – vacancy and availability rates have reached their lowest point since the second quarter of 2015, settling at 5.6 per cent and 7.0 per cent respectively, said the commercial real estate company.
It said rental rates continue to steadily trend upwards as the recent period of minimal new construction and robust tenant activity has allowed demand to near equilibrium with supply. There’s been a continued flight to quality trend in the market and that is putting pressure on owners of older generation buildings to be more competitive, said the report.
“Competitive new construction pricing, economic land pricing in Calgary’s periphery markets, demand from occupiers for newer building features and rising property taxes within city limits have all played significant roles in this continued trend,” said CBRE.
Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.