Calgary’s industrial real estate market was quite active in the third quarter of this year, with the region’s overall vacancy rate continuing to drop, according to a new report by JLL.
The commercial real estate firm’s Industrial Outlook says vacancy has fallen to 5.7 per cent from 7.8 per cent in the first quarter of 2017.
“The industrial market was active this quarter, and we at JLL anticipate this activity to continue into Q4 2018. With a mix of users looking to occupy space, ranging from standalone buildings to multi-tenant distribution space, increased deliveries in Q4 2018 and 2019 will be met with a positive tenant response,” said the report.
Net absorption – the change in occupied space – was a positive 569,814 in the third quarter, bringing the year-to-date total to 2.1 million square feet.
The positive net absorption in the quarter was driven both by a decrease in new space driving tenants to existing properties and larger lease deals being signed, said JLL.
“Uni-select and MABE signed deals over 100,000 square feet, working with Oxford Properties and QuadReal to secure distribution space in the northeast and southeast quadrants. The Q3 2018 trend in leasing was that there were several multiple large-scale deals signed, showing a higher level of activity than the first two quarters of 2018. This increase in activity signals an increase in the confidence that tenants have in the Greater Calgary and Area (GC&A) industrial market,” it added.
The report said there was 3.9 million square feet of new product under construction in the Calgary region.
“The development pipeline continues to remain filled, with multi-tenant distribution space being the product of choice for many developers. Hopewell Development was active last quarter with both Crosspointe Industrial Park and South Calgary Distribution Centre breaking ground. The two buildings will respectively bring 529,490 and 498,617 square feet of space to the northeast and southeast submarkets. Both developments are ahead of schedule and delivery is anticipated for Q2 2019,” said the commercial real estate company.
“Although there is demand for new large distribution space built on spec, smaller scale industrial condominiums are still a commodity through Calgary and Area. Builders such as the Beedie Group and SBL Contractors continue to opt for smaller developments with bay sizes ranging from 2,000 to 10,000 square feet, and the market has responded with consistent demand. This is highlighted by SBL contractors selling out of the first phase of their Glacier Village project and officially breaking ground on Glacier Village Phase Two. Beedie Group’s Evolve at District finished construction, delivering 128,300 square feet of A class condominium space to the northeast submarket, with five of 13 units currently presold.”
Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.