Canada Industrial Figures Q2 2024

Executive Summary

• The national availability rate rose to 4.2% in Q2 2024, marking the highest availability since Q3 2017 and nears the 15-year historical average rate of 4.6%.
• Sublease space has steadily risen for nine consecutive quarters to total 13.8 million sq. ft. in Q2 2024, lifting the national sublet availability rate to 0.7%.
• National net absorption totaled -5.0 million sq. ft. in Q2 2024, marking the first meaningful pullback in demand in nearly 15 years.
• New supply deliveries slowed to 3.9 million sq. ft. in Q2 2024, however, completions are expected to ramp up with 23.5 million sq. ft. expected to deliver over H2 2024.
• The national average asking net rental rate contracted on a year-over-year basis for the first time in over 12 years, decreasing 2.1% to $15.95 per sq. ft.

National availability rate nears historical average

The national availability rate climbed further in Q2 2024, rising at the same pace as seen last quarter and increasing 50 basis points (bps) quarter-over-quarter to average 4.2%.

This brings the national availability rate to its highest level since Q3 2017 and approaches the 15-year historical average rate of 4.6%.

All markets recorded increases in availability in Q2 2024, led by the Waterloo Region, Halifax and Toronto where the availability rates rose 350 bps, 330 bps and 250 bps year-over-year, respectively.

Edmonton and Winnipeg were the only markets to see availability rates hold steady quarter-over-quarter.

Sublet availability continues to steadily rise

Growing levels of sublease space have been a major driver of higher availability in Canada, steadily rising for nine consecutive quarters to total 13.8 million sq. ft. in Q2 2024.

This has pushed the national sublet availability rate up to 0.7% in Q2 2024.

Sublet availability in Q2 2024 was highest in Calgary, Edmonton and Vancouver with rates of 1.3%, 0.9% and 0.8%, respectively.

Year-over-year, sublet availability increased the most in Calgary, Toronto, Vancouver and Montreal.

Sublets accounted for a meaningful share of over 20% of total available space in Ottawa, Calgary and Vancouver in Q2 2024.

National net absorption records highest negative total in almost 15 years

National net absorption totaled -5.0 million sq. ft. in Q2 2024, marking the first meaningful pullback in demand in nearly 15 years.

The negative net leasing activity in Q2 2024 was predominately led by the Toronto market which reported -3.7 million sq. ft. of net absorption.

Over the first half of 2024, seven of the 10 tracked markets have recorded cumulative negative net absorption totals, led by Toronto and Montreal with -5.8 million sq. ft. and -1.2 million sq. ft., respectively.

Net leasing activity in Q2 2024 was strongest in Calgary with 0.4 million sq. ft. of positive net absorption, driven primarily by pre-leasing on new supply.

Construction activity edges higher amid longer-term easing

The national construction pipeline rose slightly in Q2 2024, increasing 2.0% quarter-over-quarter to total 33.4 million sq. ft. or 1.7% of national inventory.

The increase in construction activity was driven by temporarily fewer projects delivering in Q2 2024 alongside slower construction starts.

4.5 million sq. ft. of new projects kicked off in Q2 2024, predominately consisting of speculative facilities in Toronto which accounted for 74.4% of this quarter’s new construction starts.

Speculative projects make up 74.9% of the total national space under construction while Toronto and Vancouver combined account for 62.3% of the national pipeline.

Pre-leasing activity on the development pipeline slowed with 37.0% of the space currently under construction committed as of Q2 2024.

New supply to rebound in H2 2024 after slow quarter

New supply fell substantially from the pace of recent quarters, totaling just 3.9 million sq. ft. of space delivered in Q2 2024.

The slowdown in new supply is expected to be temporary as completions ramp up over the remainder of the year, with 23.5 million sq. ft. of space expected to deliver over H2 2024.

Toronto, Montreal and Calgary accounted for the majority of the new supply that delivered in Q2 2024, making up 35.5%, 25.2% and 18.9% of the total new supply, respectively.

Pre-leasing levels for new supply appears to be stabilizing and have averaged 51.2% nationally over the trailing four quarter period.

National rents contract, ending the over 12 year long growth streak

For the first time since Q3 2011, the national average asking net rental rate contracted on a year-over-year basis and decreased 2.1% to $15.95 per sq. ft. in Q2 2024.

Rent growth was strongest in Halifax, Winnipeg and Edmonton in Q2 2024, with year-over-year increases of 10.8%, 6.8% and 5.7%, respectively. The growth was partially driven by available space from new builds entering the market.

Rental rate declines were led by Montreal, London and Vancouver which recorded year-over-year decreases of 8.0%, 6.9% and 4.0%, respectively.

On a quarterly basis, the national average rental rate decreased $0.12 per sq. ft. or 0.7% from Q1 2024, marking the third consecutive quarter of softening rents.

Sale prices start to trend lower in Q2 2024

The national average asking sale price started to edge lower in Q2 2024, decreasing 1.7% year-over-year to $318.94 per sq. ft.

Halifax continues to record strong sale price growth of 20.0% year-over-year, however, sale prices have held flat in the market on a quarterly basis in 2024.

Declines in asking sale prices in Q2 2024 were led by Vancouver which contracted 8.7% year-over-year to $525.00 per sq. ft. followed by Montreal which decreased 5.2% to $238.07 per sq. ft.

On a quarterly basis, seven of 10 markets recorded flat or decreasing sale prices in Q2 2024.