industrial market

Building hike reflects strong industrial market

Monday, June 1, 2015

A significant rise in buildings over the past year has placed three industrial development markets in Canada among a list of top ten in North America.

About 17.4 million square feet is now under construction in Canada, 33 per cent of which is preleased. Toronto, Calgary and Edmonton account for 75 per cent of this total industrial space.

Findings stem from a new Avison Young report, which says Canada also claims six of the lowest vacancy rates and four of the highest average asking net rental rates, with strong investor demand in quality products.

In fact, Bill Argeropoulos, principal and practice leader of research (Canada) for Avison Young, and report author, says the industrial market is outpacing the office and retail sectors despite volatile, yet localized, oil prices and a low Canadian dollar and GDP numbers.

In the office market, he says, “Pressure is building as a result of a burgeoning new supply pipeline in major markets, such as Vancouver, Calgary and Toronto.”

Meanwhile, the closure of Future Shop and Target, along with other retailers, is a main factor affecting the retail sector.

“An established and expanding distribution and logistics-driven industry and a sustained U.S. recovery will provide upside, and if a low Canadian dollar persists, it will fuel exports and boost a retooled manufacturing sector, particularly in Ontario and Quebec,” he predicts. “The only caveat: manufacturers linked to the oil and gas sector will face headwinds.”

Looking ahead, Mark Rose, chair and chief executive officer of Avison Young, notes that strong momentum in the U.S., shows good prospects for economic expansion spreading north to benefit Canada.

Overall, out of 42 industrial markets, which Avison Young tracked across North America, vacancy declined in 32 markets, increased in eight and remained the same in two during the 12 month period to the end of the first quarter of 2015.

Other notable highlights from the study states Regina recorded the lowest vacancy rate at two per cent, while Montreal had the country’s highest vacancy at 6.6 per cent.

Western markets experienced a slight increase at 4.1 per cent during the past year compared with a 4.6 per cent decrease in Eastern markets.

The average national asking net rental rate rose to $7.90 per square foot (psf), with higher rates seen in the West at $9.21 psf, compared to the East at $6.33 psf.