Canada is in the midst of a different kind of space race.
According to CBRE’s Canada Industrial Figures Q4 2021 report, demand for industrial space soared as the year came to a close, pushing availability rates to all-time lows while sending rents to record highs.
In Q4 2021, leasing activity surged to 15.3 million sq. ft. as strong consumer spending and online shopping continue to drive this segment of the market. Two markets—Toronto and Ottawa—reported over 3.0 million sq. ft. of net absorption each. By year’s end, national net absorption had reached a 10-year high of 51 million sq. ft.
Toronto played host to nearly half of all leasing activity in 2021, with 20 million sq. ft. of net absorption. Calgary and Vancouver followed, with 7.2 million and 6.0 million sq. ft. of net absorption, respectively.
With 2021’s record-breaking leasing activity, major markets saw their industrial availability rates shrink. The national availability rate ended the year at 1.8%—the first time it has ever fallen below 2%.
Out of space
Just as CBRE predicted last spring, half of Canada’s markets have essentially run out of industrial space. As of Q4, Toronto, Vancouver, and Montreal each reported an availability rate of 0.9%, while London sat at 0.8%. At 0.6%, Waterloo Region had the lowest availability rate in the country.
With less industrial space to go around, net rental rates skyrocketed in Q4. Nationally, the average asking rate hit $10.47 per sq. ft., a 10.9% increase year-over-year. The rise was most notable in Montreal, which saw a 32.3% jump.
Several cities saw asking rents break new dollar barriers as well. Vancouver now sits above $16 per sq. ft., while Toronto and Ottawa have both broken the $12 per sq. ft. barrier.
Industrial sale prices rose in 2021, too. As of Q4, the national average asking sale price for an industrial property had increased 27.9% year-over-year—the fastest rate of growth in the last decade.
London, Ontario, far surpassed all other markets, as asking sale prices nearly doubled year-over-year to 98.7%. Despite the massive leap, the city remains the most inexpensive market in Ontario.
Less affordable markets include Vancouver, Toronto, Ottawa, and Montreal, which have each reported average asking sale prices above $200 per sq. ft.
In response to such tight market conditions, construction activity has increased nationwide. In Q4, 36.2 million sq. ft. of industrial space was under construction in Canada. However, 67.2% is already pre-leased, and what remains will likely be snatched up soon, too.
With availability rates continuing to plummet and tenant demand growing by the day, Canada’s industrial market is poised to be even hotter in 2022. Businesses in search of space will need to act fast to secure their spot and keep goods flowing to stores and direct to consumers.