Calgary industrial market report

Calgary industrial market trends

01. Vacancy on the rise

In Q3 2024 Calgary industrial market saw a marginal increase in vacancy. The overall vacancy rate is up 0.2% from Q2 and 1.7% from this time last year, mostly due to significant new vacancies in new developments. Balzac and the Southeast saw the biggest vacancy increases and were the largest submarkets for new construction. Southeast vacancy now sits at 5.5%, with Balzac at 5.8%. Despite the increase in vacancy, user demand remained strong. The market’s adjustment to the influx of new supply and the varying demand across different subtypes and locations within Calgary reflects a dynamic and evolving industrial landscape. As such, demand is growing for small and mid-bay properties, but for large-format warehouses and logistics centres as well.

 

02. Lower interest rates to drive sales activity

The steady decrease in interest rates has encouraged both vendors and purchasers to remain active, along with generating new interest in Calgary’s industrial market. Vendors are capitalizing on the opportunity to realize premiums with increased rental rates, while purchasers, particularly owner-occupiers, benefit from lower borrowing costs. A boost to sale activity is anticipated in Q4 and continuing into 2025. The interest rate cuts have also facilitated the absorption of speculative developments, contributing to market stability and consistent leasing activity across various submarkets.

 

03. Strong pre-leasing activity

Q3 2024 saw substantial new supply deliveries in the Calgary industrial market, with six projects totaling nearly 1.8 msf of new space completed, approximately 40% of which was preleased. This influx of new supply contributed significantly to the positive net absorption for the quarter. However, the surge in new supply also led to upward pressure on the vacancy rate. The current level of under-construction inventory, approximately 1.8 msf, indicates a slowdown in new speculative developments. As these newly constructed spaces are leased, the vacancy rate is expected to stabilize. Roughly half of the under-construction projects have been preleased.