REMI
More deals but less industrial uptake in 2024

More deals but less industrial uptake in 2024

Friday, January 17, 2025

Nearly 35.5 million square feet of new industrial supply came onto the market across 15 Canadian regions in 2024, pushing the national vacancy rate up to 4.8 per cent with nearly 3 million square feet of negative absorption for the year. Newly released stats from Cushman & Wakefield also show a downward trend in rents, a growing quotient of sublet space and a slide in pre-leasing.

An average national net asking rent of $15.81 per square foot (psf) at year-end 2024 is a slip from $16.80 psf as of Q4 2023. The nearly 12 million square feet of sublet space now available represents a 65.5 per cent increase over the previous year, while more than one-third of newly completed space in 2024 — about 13 million square feet — came to the market without a tenant in place, including 7.7 million square feet in the fourth quarter.

Even so, Q4 2024 saw 655,000 square feet of positive absorption, and 45.4 million square feet of leasing activity for the year was just 100,000 square feet below the 2023 tally. A somewhat different tenant profile emerged, as more leases for less than 125,000 square feet translated into a year-over-year increase in deals. In contrast, the number of tenants taking up more than 125,000 square feet fell to 45 from 66 in 2023.

“The majority of the activity with these larger transactions occurred in the second half of 2024,” Cushman & Wakefield reports. “Although three out of the four quarters of the year witnessed positive absorption, it was the strong negative absorption of 5.5 million square feet in the second quarter that led to the overall 2024 figure being in the negative.”

The four largest markets posted varied performance. Toronto ended 2024 with about 2.7 million square feet of negative absorption following the arrival of 14.4 million square feet of new industrial supply over the course of the year. Montreal recorded about 6.8 million square feet of negative absorption, while Calgary and Vancouver enjoyed additional uptake of 3.9 million square feet and 590,000 square feet respectively.

Vancouver boasts the lowest vacancy rate at 3.3 per cent and the highest average net rent at $19.99 psf. Toronto is next with a 4.5 per cent vacancy rate and average net rents of $17.33 psf. Calgary offers the most competitive average net rent of the four, at $10.79 psf, and a vacancy rate 5.8 per cent. Montreal is now one of the loosest markets in the country with a 6.3% vacancy rate and average net rent of $14.81 psf.

Looking to 2025, about 22.5 million square feet of new industrial space is set to come onto to the market, with a large share of that in Toronto and Vancouver. The national vacancy rate is forecast to climb as most of the space arrives before summer.

“The majority of the projects arriving are speculative builds that, on average, are currently only 34 per cent pre-leased,” Cushman & Wakefield analysts observe.

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