Despite steady industrial real estate market activity, new inventory pushed the availability rate to its highest level in two years in the second quarter of this year, says a new report by CBRE Ltd.
The report said the quarter had steady activity with 512,305 square feet of positive absorption – the change in occupied space. That pushed total absorption so far this year to about 1.2 million square feet. It was the 10th consecutive quarter of positive absorption in the market.
The availability rate jumped to 8.4 per cent, up 60 basis points and the biggest jump since the second quarter of 2016.
But despite the flow, CBRE said just over 1.5 million square feet of speculative product was delivered to the market.
“Recent market activity has suggested that many occupiers are beginning to value quality of real estate over location, which has historically been the major driving factor in the property selection process,” said the report.
“This has greatly benefited developers of new product; however, it has been at the peril of owners of older generation real estate. This can also be applied to activity on the purchase side of the market where success has been demonstrated for various developers of new strata and single-tenant projects.”
CBRE said about one million square feet remains in the construction pipeline, with more development announcements on the near horizon. RBI Group will soon break ground on a 130,000-square-foot, purpose-built distribution centre in CN Logistics Park. The commercial real estate firm said stronger absorption activity and good market fundamentals have sparked another active development cycle.
“Looking forward at the next several quarters, the market is likely to see additional increased availability outweigh absorption. With that said, this is typical of the Calgary market cycle following periods of robust absorption activity and subsequent construction activity. CBRE is still encouraged by general deal velocity and market activity,” it said.