The national industrial availability rate in Canada increased at a record pace quarter-over-quarter to 3.2% in Q4 2023, marking the largest annual increase since 2009 and nearly in line with the last peak in 2020. The increase was driven by softer pre-leasing levels on record amounts of new supply being delivered. Six of the 10 markets across Canada recorded year-over-year increases in availability of 120 bps or more.

Net absorption fell to its lowest levels since 2009, with net leasing activity remaining muted and totalling just under 2.5 million sq. ft. of positive net absorption in Q4 2023. New supply consistently outpaced net absorption in 2023 and surged to a record high in Q4 2023 with 16.8 million sq. ft. of new industrial product delivered.

Aggregate industrial construction activity fell substantially in Q4 2023 as new starts slowed and more projects were completed. Total space under construction dropped by 22.6% quarter-over-quarter to 34.7 million sq. ft., its lowest level since Q3 2021. Pre-leasing activity remains modest with commitments in place for 40.0% of the total national under construction pipeline as of Q4 2023.

New supply surged to a record quarterly high of 16.8 million sq. ft. in Q4 2023, lifting the annual amount of new supply deliveries to record levels, for a total of 42.2 million sq. ft. completed in 2023. Most of the completions in 2023 were located in the Toronto market, which single-handedly accounted for 40.3% of all new supply.

The trend of moderating rental rate growth continued in Q4 2023, with the national average rate increasing by 6.1% year-over-year to $16.25 per sq. ft. For the first time since Q1 2017, the national average rental rate recorded a quarter-over-quarter decrease, albeit a minor drop of just 0.3% – from $16.30 per sq. ft. to $16.25.

In 2023, the Waterloo Region, Ottawa and London markets recorded the strongest levels of industrial rent growth with 18.6%, 13.3% and 12.3% year-over-year increases, respectively. Edmonton was the only market to see rental rates decline year-over-year.

On a quarterly basis, half of the 10 tracked markets in Canada reported declines in average rental rates quarter-over-quarter.

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