Calgary is Top-Performing Canadian Industrial Market

Calgary outperformed other Canadian industrial markets in 2022, ending the year with a vacancy rate that dropped during the year by 180 bps to 2.1%, with more than 11.6M SF of positive absorption.

“The amount of annual positive absorption was the highest in the country, the year-over-year decrease in vacancy was the largest and asking net rents increased every quarter,” said Colliers Canada’s Q4 industrial report.

“With a promising development pipeline, 2023 will look to continue 2022’s strong showing in Calgary,” the report said.

More than 7.6M SF in new industrial space was delivered last year in Calgary, with a high level of pre-leasing, the report said. About 5M SF of new development is in the pipeline.

Toronto was a close second to Calgary in terms of net absorption, netting 11.5M SF and a vacancy rate of 0.3%. However, Colliers analysts noted a slowing of rental rate growth in Toronto in Q4, and some institutional investors pulling back from the GTA industrial market.

“Some tenants are now choosing to ride out current rents and gamble on future rates, rather than locking in now,” Colliers’ report said. “With the rising interest rates, the pool of buyers and sales prices have fallen on the institutional side. Investment in industrial land will also continue to slow down given the increased cost of lending.”

Other tight markets also experienced significant rent growth in 2022, Colliers said. Montreal—with a vacancy rate of 0.6%—registered the largest rent growth, with average net asking rents jumping $6.94/SF compared to Q4 2021, hitting $16.17/SF in Canadian dollars, which are trading at about 70% of US greenbacks.

There is about 4M SF of new supply under construction in Montreal, nearly double the new industrial space that was delivered in 2021. Montreal registered 2.5M SF of net positive absorption in 2022.

“Many industrial developments have been put on hold due to increased construction costs, from the force of rising interest rates. This delay will push net rents [in Montreal] even higher for available product,” Colliers said.

Vancouver remains the tightest industrial market with its vacancy rate dropping to a razor-thin 0.2%, while average net asking rents jumped $4.79/SF to hit $21.10 per SF.

About 4.4M SF of positive absorption was registered in Vancouver, with about the same amount of space being delivered as new supply. There currently is an estimated 7M SF of new industrial space in the pipeline in Vancouver.