It’s easy to blame COVID-19 for the stagnant industrial property industry. But the real reason? Lack of space. Online shopping has increased, but there’s no warehouse space for products. According to CoStar, “the vacancy rate across the country is in the low single digits, and leasing activity returned to pre-pandemic levels at about 12 million square feet in the third quarter.” Leasing activity would have been much higher in Canada if there was more space available. Currently, there’s only about 22 million SF of construction underway. That’s just 1% of the existing market. This isn’t good news for companies like Walmart and Amazon who won’t be able to expand their operations to meet growing demand. Traditional retailers and energy firms also account for a big chunk of tenants needing warehouse space. Supply shortage produced 8% growth in rent for the past two years and has slowed slightly to 7% in the 3rd quarter. The good news? Baseline rent growth is forecasted to be back on track by 2022. On April 4, 2020, non-critical commercial construction was halted due to COVID. Restrictions haven’t been lifted fast enough since then. So in the meantime, everyone is hanging on tight.
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