Canada Industrial Figures Q3 2024

Executive Summary

• The national availability rate inched higher to average 4.4% amid softer demand and more available new supply being delivered in Q3 2024.
• The steady rise in sublease space began to plateau in Q3 2024 with the national sublet availability rate holding flat quarter-over-quarter at 0.7%.
• Net absorption turned positive and totaled 1.9 million sq. ft., largely the result of pre-leased new supply that delivered over the quarter.
• The construction pipeline resumed its long-term downward and new supply rebounded from last quarter’s temporary slowdown to 7.3 million sq. ft. of deliveries in Q3 2024.
• Asking net rents contracted for the second consecutive quarter with the national average easing 3.8% year-over-year to $15.67 per sq. ft.

Availability inched higher amid softer demand and continued new supply deliveries

The national availability rate inched higher in Q3 2024, rising 30 basis points (bps) quarter-over-quarter to average 4.4%.

While the pace of quarterly increases slowed for the third consecutive quarter, the national average availability rate currently stands at its highest level since Q2 2017.

Softer demand and more available new supply being delivered has lifted availability rates across every market year-over-year in Q3 2024.

Half of the tracked markets recorded over 200 bps year-over-year increases in their respective availability rates, led by Halifax (+410 bps), Waterloo Region (+270 bps) and Toronto (+230 bps).

Meanwhile, on a quarterly basis, modest decreases in availability were seen in Edmonton, Calgary and Ottawa while Waterloo Region held steady quarter-over-quarter.

National sublet availability begins to plateau

The steady rise in sublease space seen over the last few quarters slowed considerably in Q3 2024, growing just 1.9% quarter-over-quarter to total 14.1 million sq. ft. nationally.

While the national sublet availability rate rose 40 bps year-over-year, on a quarterly basis it has remained unchanged at 0.7% as of Q3 2024.

The Calgary, Montreal and London markets recorded the largest increases in their sublet availability rates in Q3 2024, with each rising 50 bps year-over-year.

Halifax was the only market to see sublets fall on a year-over-year basis, with no sublease space available in Q3 2024.

Sublets accounted the largest share of total available space in Calgary (24.0%), Ottawa (23.3%) and Vancouver (22.2%).

Absorption turned positive on pre-leased new supply

National net absorption returned to positive territory in Q3 2024, totaling 1.9 million sq. ft. and largely the result of pre-leased new supply that delivered over the quarter.

Without the new supply in Q3 2024, national net absorption would have likely instead totaled negative 1.5 million sq. ft.

Net leasing activity in Q3 2024 was strongest in Calgary which recorded a solid 1.4 million sq. ft. of positive net absorption. On the other end, Montreal saw the largest amount of negative net absorption in Q3 2024 at 1.1 million sq. ft.

For the year-to-date, national net absorption improved to a cumulative total of negative 3.0 million sq. ft. in Q3 2024 but remains well below the 7.9 million sq. ft. over the same period in 2023.

Construction pipeline resumes long-term decline

The national construction pipeline resumed its long-term downward trend and decreased 8.4% quarter-over-quarter to total 32.0 million sq. ft. or 1.6% of inventory.

Speculative construction continues to make up the majority of the national pipeline at 74.3% of total space under construction.

Geographically, Toronto single-handedly accounts for the largest share of total construction at 43.9% of all active development.

Vancouver is the most active construction market relative to its existing footprint, building at 3.1% of inventory in Q3 2024. Elsewhere, all other market are building at less than 3.0% of their respective inventories.

Pre-leasing activity on the development pipeline has slowed further in Q3 2024, with just 34.6% of the total space under construction currently committed.

New supply rebounded while starts trend lower

In Q3 2024, there were 4.4 million sq. ft. of new construction projects that kicked off. Speculative developments in Toronto accounted for the largest share of the new projects totaling 2.6 million sq. ft.

New supply rebounded from last quarter’s temporary slowdown and rose to 7.3 million sq. ft. of deliveries in Q3 2024.

Toronto received the largest share of new supply, accounting for 40.6% of all construction completions in Q3 2024. This was followed by Montreal, Calgary and Waterloo Region with 18.3%, 14.9% and 11.7% of national new supply, respectively.

National pre-leasing levels on new supply edged slightly lower in Q3 2024, averaging 46.4%.

Net rents continue to edge lower from their recent peak

The national average asking net rental rate contracted for the second consecutive quarter, easing 3.8% year-over-year to $15.67 per sq. ft. in Q3 2024.

While asking net rents have moderated slightly from their peak, the national average remains well above levels from three years ago.

The Halifax market continued to lead rent growth in Canada and recorded an 11.2% year-over-year increase in Q3 2024, buoyed by the recent influx of new supply coming to market.

Rental rates dropped in each of the three largest markets of Montreal (-7.3% year-over-year), Vancouver (-7.0%) and Toronto (-4.3%).

On a quarterly basis, half of the tracked markets in Canada saw rental rates decrease in Q3 2024.

National sale prices decline but vary by market

Sale prices contracted further in Q3 2024 with the national average declining 2.8% year-over-year to $317.71 per sq. ft.

Healthy growth in average asking sale prices was seen in the smaller markets, led by London (+15.7% year-over-year), Halifax (+11.1%) and Winnipeg (+10.7%). However, this was offset by decreases in some of the larger markets in Q3 2024.

On a quarterly basis, six markets saw sale prices hold flat or increase in Q3 2024. This led to the national average decrease slowing to just -0.4% quarter-over-quarter.