The Calgary industrial real estate market saw a significant decline in construction activity in the fourth quarter of 2024 as developers pulled back on new projects, Avison Young reports.

Under-construction inventory fell 23% quarter-over-quarter, continuing a downward trend that began after record-high development levels in recent years. Since peaking in the fourth quarter of 2022, the amount of industrial space under construction has dropped by5.6 million square feet, according to the Toronto-based global commercial real estate services firm.

The slowdown suggests a shift towards market stabilization in coming years as supply aligns with demand, said Avison Young.

Despite the construction pullback, Calgary’s industrial sector remains active, with a total of 654,000 square feet of new space delivered in fourth quarter of 2024. The majority of these new developments cater to the e-commerce sector, with a focus on large-scale logistical distribution centres and warehouses.

Developers continue to prioritize facilities designed to meet the growing demand for efficient fulfillment and shipping operations.

While construction activity has declined, industrial vacancy rates have also dropped. The total vacancy rate fell 4.3% quarter over quarter. However, However, the rate remained 0.7% higher than it was in the fourth quarter of 2023.

Sublease vacancy saw a marginal 10-basis-point decline quarter-over-quarter but was still up 50 bps year-over-year.

The availability rate, which includes vacant space and space available for lease, rose to 7.9%, reflecting a 2.1% increase from the previous quarter and a 2.6% jump from the fourth quarter of 2023.

Meanwhile, absorption levels remained strong as the local industrial market posted 876,000 sf of positive absorption in the fourth quarter of 2024, bringing the year-to-date total to 2.2 msf.

Calgary’s population growth continues to drive industrial demand. As Canada’s fastest-growing city, Calgary has benefited from interprovincial migration and international immigration, bolstered by employment opportunities, affordable housing, and low taxes. This rapid growth has spurred heightened demand for industrial space, particularly for logistics and fulfillment centres. Larger tenants have shown increased interest in these facilities, while smaller bays remain in high demand.

As Calgary’s industrial market adapts to shifting supply-and-demand dynamics, developers and businesses alike are carefully navigating changing economic conditions, said Avison Young.

Photo: Avison Young