- What Altus Group found that the amount of available industrial space rose nationally in Q3
- Why Industrial rents remain flat, and the amount of sublease space continues to rise
- What next Industrial property values have risen since 2020, suggesting investor appetite remains strong
Canadian industrial properties are seeing record levels of availability as rents continue to flatten and the amount sublease space increases, Altus Group said in a Q3 report due out today.
Nationally, the industrial availability rate ticked up 60 basis points quarter over quarter to 6.3%. Sublease space represented 15.6% of overall available space at quarter-end.
In the case of Toronto – the country’s largest market – sublease space has nearly doubled over the past year, hitting 15% in Q3 2023, up from 8.5% in Q2 2023.
While the rise in availability might spark concerns of flagging demand amid an overall economic slowdown, Ray Wong, vice president for data solutions client delivery, said the change comes as industrial tenants are “modernizing” the amount of space they require for their operations.
“I think logistics companies especially have become a lot more efficient with their space, and don’t require the same amount of space with upgraded racking and logistics systems as they would have five years ago,” Wong told Green Street News.
“I think that’s indicative of the overall economy … as well as perhaps some overzealous leasing of the space in the last couple of years by some companies.”
Nationally, net average asking rents for industrial space held steady at $15.76/sq ft, Wong said.
On the transaction front, the industrial sector represented the largest portion of overall commercial real estate deals, with $7.2bn of properties changing hands during the first half of the year.
The average industrial sale price in Q3 was just shy of $450/sq ft, up from $402/sq ft last year and $312/sq ft at the start of 2020. Wong said that suggests there’s still plenty of investor demand for Canadian industrial space.
He pointed to fast-growing submarkets such as Southwestern Ontario and Calgary as areas that have benefited from population booms, competitive pricing, a skilled workforce and relative housing affordability, compared with more established industrial areas such as the GTA and Vancouver.
That said, he thinks there’s still plenty of value to be found in Canada’s traditional industrial markets, where stable income and returns are more likely. “There’s stability there even if you’re not going to get the uptick in value as you would in Southwestern Ontario,” Wong said.
