By Jordan LeBlanc, Junior Sales Associate, Calgary
In Calgary, the industrial sector has become a shining light in commercial real estate at a time when other sectors, especially office, have struggled to recover from the oil price plunge in 2014, which put the brakes on Alberta’s energy-dependent economy.
Behind this explosive demand for industrial space is eCommerce, with companies across the board seeking state-of-the-art distribution and warehouse space, strategically located to support ‘just-in-time’ delivery.
This “industrial revolution” is redefining business operating models, changing the way developers design buildings, and creating new sub-markets. Most companies are now expected to house a full stock of inventory with the ability to have an order sorted, packaged and delivered within a few short days. The pressure for ever-greater efficiency is driving unprecedented demand for large warehouse space.
For users of industrial space, such hot conditions have come at a price. As of Q4 2018, the average asking rental rate hit a new high of $9.07 per square foot, compared to just two years ago when the rate was $8.81 per square foot. Calgary’s secondary and tertiary markets are also experiencing heavy demand, which has resulted in tighter market conditions and rent growth.
Bigger is the New Norm
The impact of eCommerce has had a dramatic effect on the size of industrial product. Where the typical ceiling height was once roughly 20′ clear, the norm today ranges from 30′ to 36′ in facilities spanning more than 300,000 square feet. Other features of new builds include:
- Greater number of loading docks
- Wider column spacing
- Added parking for trailer storage
- Improved fiber-optic lines with ample bandwidth
- LED lighting
- Minimal office components
- State-of-the-art HVAC systems
Cold Storage Heats Up
Cold storage facilities used to store produce, dairy, and meats are experiencing a spike in demand due to changing consumer habits, including trends such as ‘meal-kits’ and online grocery shopping, driven by urban millennials. This has pressured traditional grocery retailers in Calgary to become better suited for next-day or even same-day delivery.
Cold storage facilities have also seen increased ceiling height requirements to create more space for drive-in delivery vehicles as well as improved options for automated systems.
Flexible Real Estate Strategies
It’s clear that Calgary’s industrial real estate market is undergoing revolutionary change. Online sales are soaring, warehouses are being built bigger than ever, distribution hubs are experiencing rapid growth, and consumer preferences are continuing to shift. Today, perhaps more than before, companies must prioritize their real estate strategy to support rapid change and ensure they remain differentiated in a changing market.
Jordan LeBlanc, Junior Sales Associate, is part of Calgary’s Industrial Sales and Leasing practice, working alongside Brent Johannesen, Vice President, Industrial. He joined Cushman & Wakefield in 2016 and has since developed a comprehensive set of skills that enable him to assist clients with a broad range of expertise, including recognizing tenant requirements and handling lease negotiations.