Calgary’s industrial market posted its strongest absorption in three years in the fourth quarter 2025, says a new report from Avison Young.

Leasing activity surged late in the year and pushed annual absorption to about 3.3 million square feet, according to the commercial real estate advisory firm.

The fourth quarter delivered the strongest absorption since Q3 2022, led primarily by leasing in the Balzac and Southeast submarkets. Balzac, Alta., a bedroom community located north of the city, is considered part of the Calgary industrial market.

Avison Young said demand strengthened after a slow start to the year, contributing to declining vacancy and availability rates, while new supply continued to slowed as developers adopted a more disciplined approach to construction.

Overall average asking rents remained stable throughout 2025 at $11.63 per square foot. Avison Young noted that elevated construction costs and current rental levels have limited new speculative development, though federal incentives — including the Budget 2025 Productivity Super-Deduction allowing immediate expensing for eligible manufacturing and processing buildings — could spur activity. With a relatively thin supply pipeline, the firm said, the market could tighten quickly if development accelerates.

Availability of large-bay industrial space continues to shrink. The average available unit size fell to 31,000 sf from 33,000 sf a year earlier, while options of 100,000 sf or more have become increasingly scarce. Avison Young attributed the trend to fewer projects under construction and a shift toward smaller-bay developments and build-to-suit facilities, leaving large occupiers with limited turnkey choices.

At the same time, sublease space is accounting for a growing share of available inventory. Sublease availability expanded to about 1.8 msf in 2025, with a sublease vacancy rate of roughly 1.03%. The increase reflects occupiers rightsizing their footprints and prioritizing efficiency, a trend Avison Young expects to persist in the near term.

Average asking rents for sublease space softened to $9.68 psf in the fourth quarter of 2025.

Pictured: XTL Transport warehouse in Balzac, Alta.

Photo: XTL