CALGARY — Sentiment in Calgary’s industrial real estate market is expected to be “cautious” over the first quarters of this year but tenant demand for space will remain “somewhat stable,” says a report by Cushman & Wakefield.
“As 2013 progresses, the global economy should begin to pick up, resulting in an increased demand for natural resources, setting Calgary and the rest of Alberta up for another surge in economic activity,” said the report.
It said the overall vacancy rate in Calgary’s industrial real estate market finished 2012 at 4.5 per cent, down from 4.7 per cent from the year before.
Leasing activity increased by close to 16 per cent over the previous year to about 5.6 million square feet in 2012.
Despite the strong year in the industrial real estate market, Cushman & Wakefield said a major challenge throughout the year was to acquire or lease high quality real estate.
“Market conditions at the end of 2011 and throughout 2012 led to a staggering amount of new development projects getting started or planned for Calgary and the surrounding area,” said the report. “These projects total well over four million square feet of industrial space, and many of them are slated for 2013 or early 2014 completion.”
Over 1.3 million square feet of new development was completed in 2012.
“A high level of activity throughout 2012, combined with limited available options for tenants led to a 10 per cent increase in average asking rental rates,” said Cushman & Wakefield. “Small to mid-size bay product has seen the largest increase in rate, as there has been little new development of this product type to date. Developers have reacted and are building a limited amount of mid-bay size product but there is still a clear lack of small bay product under development. The market will to continue to see upward pressure on rates in 2013 of this product type.”
The average net asking rents per square foot for the year jumped to $8.69 in the fourth quarter of 2012, up from $7.85 a year ago.