Vacancy rates for warehouses, distribution centers and other racks have fallen to five percent in and around Calgary, according to a market report from Colliers. “This is the fastest drop in vacancy rates we’ve seen in Calgary, certainly in my career,” said Tyler Wellwood, senior vice president of industrial properties at Avison Young in Calgary.
Amazon, Walmart, Home Depot, and Canadian Tire have all established facilities in Alberta in recent years.
Lowe’s distribution center is the most recent major project. Construction of a 1.2 million square foot space near Balzac was completed this summer.
Activity increased significantly during the pandemic, according to the report. Five million square feet of space has been occupied in the past year. Calgary has approximately eight million square feet of available space currently.
“Calgary has been a western Canadian distribution hub for major retailers and warehouses for over 20 years now. It’s really been showing in the last 18 to 24 months, ”Josh Magnussen, vice president of Colliers in Calgary, told CBC News.
Location, cost, availability
Calgary is cheaper and has more space options than other distribution centers like Vancouver, making the city a draw as the city of British Columbia approaches zero vacancy percent for industrial space.
Buying a warehouse here costs an average of $ 3.5 million less than in Vancouver, according to a 2018 analysis by Triskele Logistics for the city of Calgary. He also found that truck shipping costs to Western Canada are almost 50% cheaper from Calgary than from Vancouver.
The average rental rate per square foot of space there is $ 15.50, according to industry reports. Calgary prices are nearly half that, at $ 8.20 per square foot for a large warehouse.
Because Calgary sits on major highways and rail lines running north to south and east to west, it is estimated that 50 million consumers are within 24 hours of ground transportation.
Calgary also has no shortage of land for new warehouses, while Vancouver’s geographic growth is constrained by mountains and ocean.
“The geographic location, the combination of land availability and large investments in the city and being comfortable and established here, creates a good ecosystem for adding new and large industrial parks,” Wellwood said.
“It gives consistency and stability to large logistics users and manufacturers to see Calgary as a good opportunity and a good option to locate their expansion. ”
The bulk of transactions come from e-commerce and distribution companies.
Wellwood added that additional incentives like Alberta’s low corporate tax rate and Calgary’s relatively competitive property taxes often seal the deal for curious businesses.
Alberta also has no payroll tax, according to the Minister of Jobs, Economy and Innovation.
“When it comes to attracting investment to Alberta, it’s multi-faceted,” said Doug Schweitzer. “You make the point to the businesses and say, ‘Look, we want you to be in Alberta. We are more than competitive when it comes to taxes. This is where you need to be. real estate fits the equation. ‘ “
The minister says this wave of market success must be harnessed to help Alberta diversify its economy.
Keep pace with demand
Developers are starting to take advantage of the trend, increasing rental rates and being more selective with customers. Analysts say this is a good sign Calgary’s industrial real estate market can boost the economy.
But capitalizing on this success also relies on having enough moving buildings to provide more space.
Wellwood and Magnussen claim that so far developers have been responsive to the increasing demand for space and at this point they don’t care to meet the demand.
“Usually, when we’re in a bit of a space crisis, more space is going to be brought online. There will be a construction boom that we are already seeing emerging from the pandemic, and the market should be balanced fairly easily, ”Wellwood said.
There is still nearly two million square feet of industrial space under construction, most of it in Balzac and the southeastern end of Calgary.
And real estate experts are optimistic about the future of these spaces.
“It will be a snowball effect where we continue to see more and more of them,” said Craig Hulsman, vice president of the Colliers downtown office division in Calgary.
Magnussen echoed this.
“I think over the next three years we’re going to continue to see substantial growth in warehousing and distribution in Greater Calgary and therefore growth in spinoff areas like trucking and logistics. “
The minister said other important industrial agreements are expected to land by next summer.