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Vacancy rates in Calgary and Edmonton are falling as investors move beyond already strained Vancouver and Toronto markets
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The industrial real estate boom in Canada is showing no signs of subsiding, in part due to the pandemic’s increasing need for warehouses for online shopping orders and building materials for renovation projects, according to a new report.
Industrial property vacancy rates fell the most in the second quarter in Calgary and Edmonton as investors moved beyond the narrow markets of Vancouver, Toronto and Montreal, where rates hit historic lows of 1.5 percent or less, real estate researcher Jones Lang says LaSalle. Calgary was 4.6 percent, Edmonton 5.5 percent.
“Calgary and Edmonton are quickly seeing available options disappear as users seek out some of the few Canadian markets that still have significant vacancies,” JLL said in the report. “Calgary has led the way for the past six months with a vacancy rate of 160 basis points.”
The demand for industrial property is part of a global trend that is being driven in part by a shift in discretionary spending – itself borne by government stimulus payments – away from contact-intensive services such as travel and restaurants to material goods such as household appliances and building supplies for renovations. Online shopping orders need to be stacked in distribution warehouses while the same manufactured products also need to be made somewhere.
Photo by Dave Abel / Toronto Sun / Postmedia Network
The JLL report also found that vacant office space continues to be badly affected by remote working, although many companies are emerging to at least move back to hybrid working arrangements. However, some companies are taking advantage of the lower rental prices to upgrade to higher quality space.
Canada’s total office vacancy rate rose to 13.3 percent in the second quarter, ranging from the strained Vancouver market with 6.8 percent vacancy to 30 percent in downtown Calgary. Edmonton was 20 percent, Montreal 12 percent, Downtown Toronto 9.8 percent and Ottawa 8.3 percent.
“Although the demand for high quality space remains strong, vacancy rates are expected to rise due to a steady stream of new supply that is nearing completion in the next few quarters,” says JLL. “This even applies to Toronto and Vancouver, which are notorious for their low vacancy rates.”