Western Canada’s industrial market has seen insatiable demand both outpace new supply and drive up rental rates in most major markets, according to a new report by Avison Young. The first quarter of 2018 posts a record-low national vacancy rate of 3.3 per cent, lead by scant vacancies in Vancouver and Winnipeg. Ten out of 11 Canadian industrial markets have single-digit vacancies, with four markets – Vancouver, Winnipeg, Toronto and Ottawa – below the national average.
Vancouver rental rates have increased 27.5 per cent over the past three years, from $8.56 in 2015 to $10.91 in 2018. The city’s 1.8 per cent vacancy rate is expected to remain the same or decline even further over the next year.
Winnipeg’s vacancy dropped to 3 per cent in the first quarter of 2018, due to short supply of quality industrial product in desirable locations. Scarce development land is keeping new inventory levels low and rental rates high.
Prairie industrial markets are showing signs of stability and recovery, lead by interest in new Lethbridge supply and confidence in new construction projects in Edmonton and Calgary.
Edmonton’s 5.2 per cent GDP growth is expected to reverse a year of negative absorption in the city’s industrial market. Vacancy has dropped for it’s high of 6.8 per cent in mid-2017.
Stable vacancy rates and interest in new Lethbridge’s industrial condominium supply has pushed the city’s vacancy rate to 4.6 per cent and edged up rental rates from $8.02 last year to $8.15 during 2018’s first quarter.
Calgary has the highest vacancy rate in Western Canada at 7.8 per cent – however, leasing activity is up while the city’s economy is showing signs of recovery. Just one year earlier, Calgary’s vacancy rate was 8.5 per cent. If Calgary’s economy continues to gain momentum, the city’s limited supply of industrial property could become a more expensive asset.
