A report by CBRE Group, Inc. revealed that the national availability rate continued to rise and reached 3.7 per cent in Q1 2024, driven by available new supply being delivered alongside a rise in sublease space in certain markets.
The pace of increase in national availability slowed to 50 basis points (bps) quarter-over-quarter from the 70 bps increase recorded in Q4 2023, noted the report.
The report also noted that available new supply being delivered over the quarter alongside a rise in sublease space in some markets were the main drivers of higher availability across Canada.
According to the report, the construction pipeline continued to ease and contracted 11.2 per cent quarter-over-quarter to 32.0 million sq. ft. in Q1 2024, representing a 29.5 per cent total decline since its peak in Q3 2023.
National net leasing activity softened further in Q1 2024, with net absorption turning negative for the first time in 15 quarters and totaling -350,000 sq. ft., the report noted.
While the majority of markets reported minimal levels of net absorption in Q1 2024, Calgary and Vancouver continued to see over 1.0 million sq. ft. of positive net absorption, which the report noted was largely the result of some fully pre-leased new supply being delivered.
In terms of pre-leasing levels, the report noted that they remain modest, at 49.9 per cent of the new supply delivered in Q1 2024 pre-leased and 39.2 per cent of the space currently under construction already committed.
According to the report, construction activity continued to ease in Canada with the development pipeline contracting 11.2 per cent quarter-over-quarter to 32.0 million sq. ft. in Q1 2024, representing 1.6 per cent of total inventory. Since reaching its peak in Q3 2023, overall construction levels have declined 29.5 per cent as market dynamics return to normal, noted the report.
The majority of the new supply delivered in the quarter was for large bay product located in Toronto, Vancouver, Calgary and the Waterloo Region, according to the report.
The report also noted that while year-over-year rent growth slowed to its lowest level in seven years, on a quarterly basis, the national average has declined for the second consecutive quarter.
The strongest rental rate growth was recorded in the Halifax and Ottawa markets which both saw double-digit year-over-year increases in Q1 2024 of 12.1 per cent and 11.1 per cent, respectively, according to the report. Rental rate declines were led by Edmonton and Montreal with declines of 5.2 per cent and 3.7 per cent year-over-year, respectively.
In terms of the national average industrial asking sale price, it has been holding relatively flat over the trailing four quarter period, rising 0.7 per cent year-over-year in Q1 2024 to $324.57 per sq. ft.
Sale price decreases were led by the Vancouver market with a 10.0 per cent year-over-year drop to $540.00 per sq. ft. and followed by the Waterloo Region with a decline of 0.7 per cent to $246.51 per sq. ft., according to the report.
