Rental rate growth streak ends as availability rate approaches 15-year historical average: CBRE
According to CBRE’s Q2 2024 Canada Industrial Figures, the national availability rate rose to 4.2 per cent in Q2 2024, marking the highest availability since Q3 2017 and nears the 15-year historical average rate of 4.6 per cent.
The report noted that sublease space has steadily risen for nine consecutive quarters to total 13.8 million sq. ft. in Q2 2024, lifting the national sublet availability rate to 0.7 per cent.
According to the report, sublet availability in Q2 2024 was highest in Calgary, Edmonton and Vancouver with rates of 1.3 per cent, 0.9 per cent and 0.8 per cent, respectively. Year-over-year, sublet availability increased the most in Calgary, Toronto, Vancouver and Montreal.
National net absorption totaled -5.0 million sq. ft. in Q2 2024, according to the report, marking the first meaningful pullback in demand in nearly 15 years.
Over the first half of 2024, the report noted that seven of the 10 tracked markets have recorded cumulative negative net absorption totals, led by Toronto and Montreal with -5.8 million sq. ft. and -1.2 million sq. ft., respectively. Net leasing activity in Q2 2024 was strongest in Calgary, according to the report, with 0.4 million sq. ft. of positive net absorption, driven primarily by pre-leasing on new supply.
In terms of the national construction pipeline, the report noted that it rose slightly in Q2 2024, increasing 2.0 per cent quarter-over-quarter to total 33.4 million sq. ft. or 1.7 per cent of national inventory.
The increase in construction activity was driven by temporarily fewer projects delivering in Q2 2024 alongside slower construction starts, according to the report.
A total of 4.5 million sq. ft. of new projects kicked off in Q2 2024, mainly consisting of speculative facilities in Toronto which
accounted for 74.4 per cent of this quarter’s new construction starts.
In terms of new supply deliveries, they slowed to 3.9 million sq. ft. in Q2 2024, however, the report noted that completions are expected to ramp up with 23.5 million sq. ft. expected to deliver over H2 2024.
The report noted that the national average asking net rental rate contracted on a year-over-year basis for the first time in over 12 years, decreasing 2.1 per cent to $15.95 per sq. ft.
For the first time since Q3 2011, the national average asking net rental rate contracted on a year-over-year basis and decreased 2.1 per cent to $15.95 per sq. ft. in Q2 2024, noted the report.
In terms of the national average asking sale price started to edge lower in Q2 2024, decreasing 1.7 per cent year-over-year to $318.94 per sq. ft.