Canada Industrial Figures Q4 2024

Executive Summary

• Cumulative net absorption returned to positive territory in Q4 2024 to total 1.4 million sq. ft. for the year as stronger demand in H2 2024 offset the negative net absorption from earlier in the year. The reversal was largely due to positive net leasing activity in Alberta, as Canada’s other major markets all ended 2024 with negative total net absorption.
• The national availability rate rose 160 bps to 4.8% in 2024 as new supply greatly outpaced total leasing demand in nearly every market this year. Edmonton was the one exception that saw 1.0 million sq. ft. more annual net absorption over its total new supply in 2024.
• A resurgence of construction completions in Q4 2024 lifted annual national new supply to its second highest level on record of 35.6 million sq. ft. But as deliveries have outpaced construction starts, the overall development pipeline has fallen as pre-leasing activity also slowed from averaging around 90% in recent years to a low of 36.0% in Q4 2024.
• Despite rent growth in six markets in 2024, the national average has been weighed down by declines in the three largest markets resulting in a 4.6% annual decline to $15.51 per sq. ft.

New supply continues to push up availability rates

The national availability rate rose by 40 basis points (bps) quarter-over-quarter to 4.8% in Q4 2024, reaching its highest level in nearly eight years.

The resurgence of new supply in Q4 2024, which delivered mostly as available space, continues to be the primary driver for higher availability in Canada.

For the full year 2024, the national availability rate has risen by 160 bps which matches the same annual increase as seen in 2023.

In 2024, the greatest annual increases in availability were seen in Halifax, Waterloo Region, Vancouver and London. Edmonton was the only Canadian market that recorded a year-over-year decrease in availability rate of 70 bps.

On a quarterly basis, Waterloo Region recorded the largest rise in availability with a 130 bps increase in Q4 2024. This was followed closely by Vancouver and Halifax which both saw availability grow by 120 bps quarter-over-quarter.

Space for sublease plateaus with second consecutive quarterly contraction

While the national sublet availability rate continues to hold at 0.7%, the amount of sublease space dropped by over 216,000 sq. ft. in Q4 2024 for a national total of 13.6 million sq. ft. Sublets account for the largest share of total available space in Calgary (19.7%), Ottawa (17.6%), Edmonton (16.4%) and Vancouver (15.9%).

This marks the second consecutive quarter of easing sublease space since peaking in Q2 2024. However, the national sublet availability rate remains 0.2% higher year-over-year, or 3.9 million sq. ft. larger.

Toronto, Waterloo Region and London recorded the largest year-over-year increases in their sublet availability rates with each rising 30 bps in 2024.

Four markets saw their sublet availability rates decrease in 2024. This was led by Edmonton which dropped 20 bps and was followed by Calgary, Winnipeg and Ottawa with 10 bps decreases.

Net leasing activity in Alberta offsets weakness in the major markets in 2024

Quarterly national net absorption rebounded to its highest positive level in two years, totalling 4.9 million sq. ft. in Q4 2024.

This surge of positive net leasing activity in Q4 2024 reverses the negative trend seen earlier in the year and cumulatively totals 1.4 million sq. ft. of positive national net absorption for 2024.

Annually, Calgary and Edmonton recorded the strongest levels of net absorption in 2024, combined totalling 7.5 million sq. ft. of positive net leasing activity that offset the negative net absorption seen in the major markets.

On a quarterly basis, six of the 10 markets saw signs of improvement in Q4 2024 with positive net absorption in excess of their respective new supply pre-leasing. In particular, Toronto and Edmonton reported over 1.1 million sq. ft. of positive net absorption above their pre-leasing for the quarter’s new supply.

On a quarterly basis, total net absorption was led by Toronto, Edmonton and Calgary with 2.9 million sq. ft., 1.6 million sq. ft. and 1.2 million sq. ft. of net leasing activity, respectively. 

Development activity falls as starts remain muted

Development activity in Canada continues to fall and shrunk by 27.7% quarter-over-quarter, or 9.2 million sq. ft., to 23.9 million sq. ft. of space actively under construction in Q4 2024.

National construction activity as a share of total inventory compressed to an 18-quarter low of 1.2% in Q4 2024.

Construction starts remain relatively muted with 5.1 million sq. ft. of new development projects kicking off in Q4 2024. Of which, speculative projects accounted for the vast majority at 85.7% of the quarter’s starts.

Construction activity is predominately concentrated in Toronto which accounts for 42.1% of the pipeline, as well as Vancouver which makes up 23.1% of national activity.

Overall across Canada, construction levels remain low with no market building at more than 2.5% of its existing inventory.

New supply surges in Q4 2024 for second highest annual total on record

New supply surged to 14.6 million sq. ft. in Q4 2024, resulting in an annual total of 35.6 million sq. ft. of space delivered across Canada in 2024. This marks the second highest annual total of new supply following the record amount of deliveries seen in 2023.

Speculative projects in Toronto made up the largest component of deliveries in Q4 2024, single-handedly accounting for 38.9% of the national total.

Annually, Toronto new supply outpaced all other markets by a wide margin, with over 14.2 million sq. ft. of space delivered in 2024. Calgary and Vancouver followed distantly with 5.6 million sq. ft. and 4.5 million sq. ft. of annual new supply, respectively.

Pre-leasing levels on new supply deliveries contracted further in Q4 2024, averaging 36.0% nationally. In the under construction pipeline, pre-leasing remains weak nationally at 39.2%, largely as a result of slower activity in the Toronto market.

Rent declines in top markets drag on national average

The national average asking net rental rate has steadily, but modestly, declined since peaking in Q3 2023 and decreased to average $15.51 per sq. ft. in Q4 2024.

On an annual basis, this represents a 4.6% year-over-year decline nationally in 2024. Despite six of 10 markets recording rental rate increases this year, the national average has been weighed down by rent decreases in the three largest markets in Canada.

Rent growth was led by the smaller markets of Halifax and Ottawa in 2024 with 14.9% and 7.6% year-over-year increases, respectively. Particularly for Halifax, its outsized rent growth is largely attributed to the influx of available new supply lifting the market average.

Relative to three years ago, the recent declines in rents remain marginal compared to the 36.5% gain over the national average rental rate in 2021.

Sale prices decrease for the second year in a row

The national average asking sale price declined 3.8% in 2024 to $313.95 per sq. ft., marking the second consecutive year of annual decreases in Canada.

Most markets continued to record sale price growth in 2024, led by Winnipeg and Ottawa which saw increases of 19.7% and 15.5%, respectively.

Meanwhile, sale prices in Toronto, Vancouver and Montreal declined by 6.7%, 6.4% and 4.3% in 2024, respectively.

On a quarterly basis, London and Toronto were the only markets to record a decrease in average asking sale prices, while eight of 10 markets saw their sale prices hold flat or grow in Q4 2024.