Canadian industrial real estate investors are starting to return large amounts of space to the market, says a new Colliers report.

The industrial sector is widely regarded as the investment sector of choice as investors look to come off the sidelines in 2024. But Colliers says the asset class is beginning to face challenges after many companies rapidly expanded their footprints during the pandemic-induced boom.

Many firms are giving space back and prompting increases in both vacancy, which has more than doubled year-over-year, and availability in many markets. This situation has resulted in many sales listings for properties comprising 100,000 square feet or more..

“Landlords in areas like Winnipeg, Toronto and Montreal have begun demising larger blocks of space to appeal to the small-to-mid bay tenant statements,” says the report.

Meanwhile, asking net rental rates are softening. Whereas hikes of more than 30% were common in past years, most markets are showing increases of less than 10%.

But the national industrial vacancy rate is still a modest 2%, and availability stands at 3.3%. And, a new Altus Group report shows that Canadian industrial construction completions reached a new high in the fourth quarter of 2023.

Photo: Altus Group