Canada’s two-billion-square-foot industrial market continued to experience robust demand in Q1 2017, as specific areas with diverse and growing tenant bases are nearing full occupancy.
Avison Young’s Spring 2017 North America and U.K. Industrial Market Report looked at the market from a regional perspective and states that Vancouver qualified for the top 10 development markets and has the lowest vacancy rates in Canada. Toronto, Regina, Winnipeg and Ottawa also have the 10 lowest vacancy rates, while Regina and Edmonton claimed two of the 10 highest average asking net rental rates.
By the end of Q1, the country’s industrial vacancy rate was 3. 7 per cent, down 30 basis points from Q1 2016. Halifax retained both the highest rate (14.7 per cent) and greatest year-over-year change, while Winnipeg (3.1 per cent) recorded the biggest decline.
“Canada’s industrial market continues to operate under the weight of a supply shortage, despite regional disparities in performance,” says Bill Argeropoulos, principal and practice leader, research (Canada) for Avison Young. “Clearly, the supply shortfall in existing product and land supply has kept developers busy, but they remain prudent in delivering product to meet the market’s changing needs. A competitive bidding environment persists and, although demand levels differ from one market to the next, rental rates are either holding firm or moving higher as tenants seeking alternative premises face diminishing options.”
The national average net asking rental rate increased marginally from one year earlier to close the first quarter of 2017 at $8.05 per square foot.Year-over-year, rents grew in seven of the 11 markets (with four markets posting rents above the national average).
Uncertainty around U.S. government trade policy prevails, which could pose a risk to the industrial market. However, current trends, like e-commerce, are really defining the market right now.
“Like everywhere else, e-commerce is driving much of the new development, featuring modern, technologically advanced distribution facilities – with higher clear heights, large bays and ample trailer parking space – near urban centres,” Argeropoulos adds. “However, not to be forgotten, older product in urban centres, once deemed obsolete, remains a hot commodity, offering timely and cost-effective solutions to shorten the last mile of the supply chain.”