NAIOP Industrial Panel

January 23, 2016

Panel Members:

  • Beth Berry - Beedie Development Group
  • Jason Kiselbach - CBRE Limited
  • Murray DeGirolamo - Hopewell Development
  • Sean Ungemach - Cushman & Wakefield
  • Blake Asselstine - Beedie Development Group
  • Darren Cannon - Colliers International Canada


In 2015, there was too much spec space, however, there has been high absorption. There were 19 new leases over 90,000 sf in 2015, 2.5 million sf of space leased and now the lowest vacancy since 2008. There are 17 lease options for anyone looking for a space that is over 150,000 sf in inner municipalities and available for 2016 occupancy.

Some larger users are consolidating in Calgary such as Home Depot, who is vacating their Delta Plant. 2013 and 2014 were disastrous years, whereas 2015 has improved dramatically. Now in 2016, a lot of large space renewals have been done in advance, and new buildings are seeing 75% occupancy upon completion. A reduction in absorption is anticipated in 2016.

The start of 2015 was a tenants market and landlords gave lots of free rent to get high face rates. At the end of the year, free rent was disappearing.

The higher the building, the cheaper the cubic foot rental cost would be. So, buildings with high ceilings of 30 feet, rent for more than buildings with lower ceiling height. Yet, the rent increase is disproportionate. In other words, the incremental increase per foot decreases as the building height increases. The demand for high ceiling ware houses is increasing and thus, the demand will continue to increase from large bay users.

Location will still be important. Existing tenants want to stay in their existing locations.

Older building rental rates have not raised much over the last five years; they are still hanging around the $5.50 mark. However, the buildings are not worth tearing down yet as they still have economic life and demand is steady.

Demand is stronger for the newer product, while the older product just stays stable.


In 2015:

  • $1.1 billion of sales - highest annual sales volume ever
  • Number of deals down 5%
  • Ave price $172/sf.

There was a lack of product available for investors in 2015 and hence few transactions.

Costs to build are going up, so one might anticipate prices will continue to rise.

Cap rates will continue to go down; 4.5% cap rate could be reached if mortgage rates stay low. Large properties will also sell for lower cap rates.

The difference in the cap rate of B and C buildings vs. A cap rates is greater than it used to be.