Calgary Industrial Real Estate Market Booms in 2022

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Calgary’s industrial real estate market is seeing record activity after a surge in the COVID-19 pandemic, which experts say could mean more job opportunities for residents and a growing tax base for the town.

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Real estate company JLL recently released national information for the second quarter of 2022 on industrial real estate markets, including Calgary. The latest numbers show a high level of activity, with 905,410 square feet of space taken off the market as developers seek to meet the skyrocketing demand caused during the pandemic.

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“Calgary continues to present a viable market for domestic industrial occupiers and developers,” reads JLL’s latest report.

The latest figures show that there are approximately 3.5 million square feet of vacancies in the city, representing a vacancy rate of 1.5%. By comparison, Toronto has a vacancy rate of 0.9% and Vancouver is at 0.8%.

Ilya Raykhlin, associate broker at Re/Max Commercial, said Calgary’s vacancy rate and location make it an attractive alternative for businesses that need space and want to look outside of the big markets like Vancouver and Toronto.

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“Our vacancy rate at the end of the second quarter of 2022, and it really depends on which broker you ask, it’s hovering between 1.5% and 2.5%… This is the lowest vacancy rate Calgary has had known since 2008,” Raykhlin said. “It’s record activity, and it continues to soar. Demand is skyrocketing. »

Raykhlin said absorption rates are at record highs, as are rental rates in the city. He said the only constraint in the market right now is having enough infrastructure to meet demand, adding that demand around the world has increased during the pandemic and has grown almost entirely around e-commerce, as most of the world’s population has spent their money online.

“Unlike other parts of the country, Calgary isn’t constrained by things like mountains or the ocean and we offer flat topography with soil conditions that are conducive to development, so we’re just a natural location to develop these large-footprint facilities,” Raykhlin said.

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Greg Kwong, regional general manager for the Canadian Prairies for CBRE Ltd., said all major retail companies operating in e-commerce, such as Amazon and Canadian Tire, either distribute through Calgary or plan to be here.

“Virtually every major retailer that has a core e-commerce component to their business is here or is looking to be here,” Kwong said. “Most of them are along the highway, the Deerfoot Trail corridor, and you can see all the signs as you go through and around those neighborhoods.”

Kwong said Calgary’s industrial market has historically centered around oil and gas, but there has been a shift toward accommodating other industries, such as e-commerce. He said continued investment growth in the area means the city will benefit from an expanded tax base and Calgarians will have access to more jobs.

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“The skills of workers are changing and we certainly need to enable through immigration and retraining people to be able to work in these warehouses again,” Kwong said.

While continued investment and attraction to the sector could be good news for residents and industrial property owners, Raykhlin said it could lead to higher rental rates for retailers and tenants.

“It’s not going to be a favorable economic climate, in that sense, for tenants,” Kwong said.

However, data from JLL shows that Calgary rental rates currently remain quite low compared to other major markets. During the last quarter, Calgary recorded an average rate of $9.93 per square foot, compared to Toronto where the average rent is $15.32 per square foot, and Vancouver, where the average rate is around $18.70 per square foot.

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