There is more than 3.6 million square feet of industrial real estate in the construction pipeline, signalling the beginning of the next significant development cycle in Calgary, according to a new report by CBRE.
The commercial real estate firm said several notable market moving deals in the second quarter of this year contributed to the sixth consecutive quarter of positive absorption, which is the change in occupied space.
It said demand for distribution inventory is driven by regional consolidations into the Greater Calgary Area and the rise of e-commerce operations in Calgary continues to drive demand for distribution space.
The CBRE report said the level of construction is an “indicator that developers and institutions have renewed optimism in the recovering Calgary economy and, in particular, the industrial market.”
“Minimal new supply in the last two years, stemming from challenging economic conditions has allowed demand to reach equilibrium with supply,” said the report.
“New development comes on the heels of six consecutive quarters of robust absorption in a market that became increasingly in need of new product. Following a familiar theme seen during the last two development cycles, the development community is more than happy to respond.”
After reaching an historical high of 9.8 per cent in the fourth quarter of 2016, the city’s availability rate has steadily declined in the industrial market to 8.1 per cent in the second quarter of 2018.
During the second quarter, 545,609 square feet of new space was added to the market. Absorption was 254,010 square feet.
“There are currently multiple large-scale users seeking space in the market – the most we’ve seen since 2014. However, demand from mid- and large-scale users is still being counteracted by the subdued small bay market,” said CBRE.
“Although our market is statistically healthy, a challenging environment for smaller businesses continues to place pressures on owners of small bay product.”
Respected business writer Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald in various capacities, including 12 years as a senior business writer.
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