1. BARCLAY STREET REAL ESTATE LTD.
Quarterly Industrial Report Calgary, Alberta
Third Quarter 2015
INDUSTRIAL REAL ESTATE
SEMI-ANNUAL REPORT | BSRE INDUSTRIAL REAL ESTATE Q3 2015
MARKET UPDATE
C
algary’s industrial vacancy rose 0.65% to
reach 5.48% as of September 30, 2015.
This represents a total of 7,477,844
square feet of vacant space in an existing
inventory of 136,431,824 square feet in the
Greater Calgary Area. Year to date inventory
growth has been 3,787,578 square feet,
which is greater than total inventory growth
during all of 2014 of 3,494,240 square feet.
The greatest contributor to the increase in
vacancy in this quarter is considered to be the
increase in inventory through construction.
There was 2,785,682 square feet of new
construction completed during this quarter
alone which equates to a 2.08% increase in
total inventory. The largest facilities completed
were the new 1,065,000 square foot Home
Depot distribution facility in Dufferin, WAM’s
two speculative buildings in Stonegate
totaling 490,000 square feet, and Hillwood’s
502,000 square foot building in Balzac.
Absorption for the quarter was positive
overall at 1,765,302 square feet, with again
the largest contributor being Home Depot.
Absorption year to date is recorded at
2,023,589 square feet as of Q3. However,
expectations are for this number to decrease
significantly in Q4, as a number of spaces that
are currently listed on the market for sublease
are expected to be vacated. The potentially
surprising positive absorption number of 1.7M
for Q3 should therefore not be considered a
true account of absorption,as we believe this is
a transition period for a number of companies
who made plans 12+ months ago to move
facilities. Sublease availability increased by
222,778 square feet this quarter, to 2,113,742
square feet available. This still represents only
16% of total availability, which is 12,947,268
square feet and includes planned and under
construction inventory that is actively being
marketed. We are still forecasting positive
absorption overall for 2015, but vacancy will
continue to rise. As at the end of Q3 there
is still 2,533,207 square feet of space under
construction, of which 2,423,798 square feet
is actively being marketed as available. It is
expected that approximately 90% of this
space will be enclosed before the end of 2015
and added to existing inventory numbers. If
we assume a lease-up rate of 30% of this
speculative product by completion, then we
would assume an increase in vacant space by
1.5M square feet by the end of the year from
additional speculative construction, which
would increase the vacancy rate by 1.1%. This
does not take into account sublease space
that will be vacated, as previously discussed.
Tenants are seeing more options
available, especially in the freestanding
segment which is historically an
extremely tight market until recently.
Rental rates have dropped slightly overall but
are considered to be stable. Inducements
Current Vacancy at a Glance
OVERALL Q3 RATE
5.48%
+0.65%
FROM Q2 2015
JON MOOK
Executive Vice President
c: 403-616-5239
j m o o k @ b a r c l a y s t r e e t . c o m
CASEY STUART
Vice President
c: 403-828-8669
c s t u a r t @ b a r c l a y s t r e e t . c o m
ERIC BRENNER
Associate
c: 403-714-4721
e b r e n n e r @ b a r c l a y s t r e e t . c o m
BARCLAY STREET REAL ESTATE LTD.
INDUSTRIAL DIVISION
Bay 117, 4950 - 106th Avenue SE
Calgary, AB T2C 5E9
www.barclaystreet.com
have increased, and tenants have found more
negotiating leverage due to captivated landlords
when approached with an offer.
Landlords of “B” and “C” class properties are
more negotiable on rental rates versus newer
product.
Forecasting to the end of 2015, we are expecting
rental rates to decrease modestly, inducements
to continue to increase, and vacancy to rise. Total
occupied space will decrease in Q4 and sublease
availability will continue to increase.