Of the six major markets in Canada, one – Edmonton, at 4.3% as of Q3 - is in this range, with the rest at or below 2%. Tight market conditions have been in place since early in the pandemic, when e-commerce took off, driving demand for distribution space.
As the economy slowed recently, industrial vacancy has increased. This easing has been welcomed in most markets, as vacancy rates had been unsustainably low, even with sizeable delivery of new space. As markets move into this next phase of the real estate cycle, are we building enough space or too much?
Montreal is the only major market building less space than needed to reach 3% if no leasing takes place. Vancouver, Toronto, and Ottawa are building in line with average absorption trends and are therefore susceptible to rapid swings in demand. Calgary and Edmonton are building more than the amount of additional vacant space or unleased new supply required to reach 3% and seem likely to reach this level of vacancy in the next 12-24 months. (As mentioned, Edmonton is already above 4%). The excess construction in Alberta may also be a move to lure occupiers from Vancouver who cannot find suitable options and are able to serve their needs from Alberta.