Canada’s market for industrial real estate approached the record low vacancy rate it hit a year ago at the beginning of the Covid-19 pandemic.
New research from JLL shows the vacancy rate was 2.7 percent at the end of 2020, just 10 basis points above last year’s record low.
Factors contributing to the low vacancy rates include strong leasing activity alongside an increase in owner-occupiers. The spate of small-bay space coming onto the market at the beginning of the pandemic has also subsided with the uptick in economic activity, JLL notes in a new Canadian market analysis.
Alberta, which has had the highest vacancy rates in recent months, saw a strong decline as Canadian Tire took up a 500,000 square-foot space this quarter.
Vacancy at record lows
In the tightest markets, Toronto and Montreal, vacancies climbed slightly, but remain below two percent. Meanwhile Toronto rents increase by 15.3 percent in 2020, followed by Montreal, which saw an uptick of 8.6 percent.
Overall, average rents in the last quarter of 2020 were down to $9.97 per square foot. The national average, according to earlier JLL research, hit $10 per square foot for the first time ever in Q3 2020.
Quickly after the beginning of the pandemic, e-commerce businesses were the dominant players taking up new space, absorbing 40 percent of the deals. In the latter part of the year, however, third-party logistics players took over.
Major deals in the fourth quarter included a 659,000-s.f. deal signed by Proactive Group in Vaughan, Ontario: the 498,000-s.f. deal leased by Canadian Tire in Calgary; and a 592,000-s.f. deal done by ULINE in the Toronto area.
JLL highlighted deals by TJX. It inked a second expansion this year after a Q4 2020 deal in Brampton, Ontario. The company operates HomeSense and Winners, and is seeking to move operations online after Covid-19 lockdowns seriously impacted its Canadian business.
In spite of construction shutdowns in Ontario and Quebec because of the pandemic, developers still manged in 2020 to build more than they did in 2019. Total space completed hit 22.2 million s.f., a slight increase over 2019’s 21.7 million s.f.
“This also represents a notable increase over the annual average between 2016 and 2018 of 15 million s.f. Toronto alone represented 53.3 percent of total deliveries in 2020 as near historically low vacancy continues to entice developers into building,” the report noted.
Demand combined with shortage of land new major urban population centres has pushed developers to innovate, building multi-story DCs for the first time. In British Columbia, Oxford is at work on the Riverbend facility, while in Ottawa Broccolini is constructing a two-story building for Amazon.