Photo by Thomas Hawk

Larger longer-term deals, a reduction in unoccupied, recently-completed space, and an overall increase in demand have been witnessed, says a new report by Avison Young issued in March.

Availability of Calgary’s industrial market was 5.2% (including sublease space) as of the end of 2010. This is up marginally from 5.0% in the previous two quarters because two large, single-tenant industrial buildings became vacant: Haworth Ltd.‘s facility at 10 Smed Lane S.E. and Enerflex Systems Ltd.’s facility at 4700 47th St. S.E.

Many large leases of 50,000 square feet and up were completed at the end of 2010 and in early 2011. Overall demand remains lower than peak levels of the last cycle, but activity levels rose during last year and in the first quarter of 2011. Moreover, rental rates are stabilizing. Several developers brought new products to market due to the trend of decreasing vacancy and this new construction will be available by the end of this year.

Increasing vacancy is not expected short-term and we expect activity levels to remain healthy. The report also states: “There are also more options today in terms of serviced, zoned industrial land than there have been for many years. It is expected that the number of lease transactions will increase as the perception that the bottom of the economic decline has been passed.”

Average asking rental rates for industrial properties in Calgary started rising in the fourth quarter of 2010. The overall average asking rate was $7.54 per square foot per annum net. The disparity between asking rates and actual deals still exists, but the difference is not too significant.

The average price per acre for Calgary industrial land has decreased. According to the report, a considerable cause of this change may be the general lack of sales, which has resulted in very few market comparables to analyze before offers are being made, forcing purchasers to rely on older, more expensive sales to evaluate properties.