Canadian industrial market update – Q4 2024

National industrial availability rate flat at 6.3% in the fourth quarter of 2024

Canada’s national industrial availability rate flattened at an elevated rate of 6.3% (Figure 1), unchanged from the previous quarter. Additionally, sublet space plateaued, accounting for 14.7% of the available space, the same as a year ago. Although industrial rental rates have moderated over the last few quarters, the average rental rate continues to exceed the levels observed in the past decade.

As of the fourth quarter of 2024, the national absorption rate has returned to positive territory for the first time since Q4 2023. However, the national construction pipeline has decreased compared to the previous year, now at 23.7 million square feet, a 7.5% decrease in total space under construction year-over-year. Overall market conditions have eased due to a short-term oversupply, with a bifurcation in the market based on the maturity and location of the asset.

As of September 2024, Statistics Canada reported retail sales have increased 0.4% to $66.9 billion, with sales up in six of the nine subsectors. Furthermore, as Canadians continued to cut discretionary spending and instead shifted household spending to essential goods and services. Food and beverage retailers observed the highest increase of 3.0%, and more specifically, a 3.3% increase was recorded in the supermarkets and other grocery retailers (except convenience retailers) subsector.

Figure 1 - Industrial availability rate

Figure 2 - Industrial completions and availability

52 industrial projects were completed in the fourth quarter, totalling nearly 10.4 million square feet, with 76% of the space available for lease. Toronto and Southwestern Ontario comprised the majority of new supply in terms of total square feet, at 3.0 and 2.3 million square feet, with 85% and 90% availability, respectively (Figure 2).

Figure 3 - Industrial under construction and availability

As of the fourth quarter of 2024, 96 projects were under construction, totalling 17.8 million square feet, with 77% of the space available for lease (Figure 3). Vancouver recorded the highest pre-leasing activity at 46% followed by Southwestern Ontario at 38%.

Conclusion

In 2024, the industrial market eased toward balanced conditions as investors operated with cautious optimism amid softened economic conditions. According to Altus Group’s Q4 2024 Canadian CRE industry conditions and sentiment survey, investor sentiment remains strong as they expect strong performance in the next 12 months for industrial assets. Additionally, the industrial sector comprised the largest share of Canada’s total investment volume in Q4, with approximately $12 billion in dollar volume transacted, a 14% decrease year-over-year.

View the Canadian industrial market update for Q3 2024.

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