Industrial vacancy rate stays low despite addition of new buildings
Despite the addition of 285,000 square feet of building space, the availability of industrial property in Red Deer tightened between July 2011 and the same month this year.
That’s one of the findings of a market survey conducted recently by Soderquist Appraisals Ltd. The Red Deer real estate appraisal and consulting firm calculated that the local industrial vacancy rate stood at 3.33 per cent in July, down from 3.57 per cent a year earlier.
Mike Garcelon, the CEO and senior appraiser at Soderquist, said the latest figure suggests that there is strong demand for industrial space here and the sector is healthy.
“This is very good for Red Deer, because the industrial sector is a large part of our economy.”
The survey considered 14 industrial districts in and adjacent to the city of Red Deer. Queens Industrial Park to the west and McKenzie Industrial Park in Red Deer County to the south were excluded because there were no buildings there in July.
Total industrial building space was calculated at about 12.2 million square feet, up 2.4 per cent from the nearly 12 million square feet in July 2011.
“There was a lot of new construction this year,” said Garcelon.
However, vacant industrial space declined 4.8 per cent — to about 407,000 square feet from 427,000 square feet. That appears to be putting upward pressure on rental rates, said Garcelon.
“It’s kind of a self-correcting thing. Once vacancies get low enough, rents will start going up and then it makes it feasible to build.”
That, in turn, will bring rents down, he said.
This is the second year that Soderquist has conducted an industrial property survey. It also looked at commercial property this year — specifically Red Deer’s strip malls, enclosed malls and power centres.
The vacancy rate for commercial property as of August, based on a total area of 4.4 million square feet, was calculated at 5.17 per cent.
When the number of commercial units that were unoccupied was considered — 76 out of 955 — the vacancy rate was found to be 7.96 per cent.
Although higher than Garcelon had hoped, these numbers still reflect a healthy market, he said.
“In Red Deer our economy is an industrial-based economy. So when we get into the recovery phase of the cycle it’s the industrial side that should recover first.”
Industrial growth, he added, translates into more jobs and spending, which in turn spur commercial growth.
The commercial space in Red Deer that the Soderquist survey considered included 1.1 million square feet (or 225 units) in enclosed malls, 2.4 million square feet (or 657 units) in strip malls and 918,000 square feet (or 73 units) in power centres. Most of the downtown area was excluded, because the changing mix of commercial and residential space there makes it difficult to measure shifts in vacancy rates, said Garcelon.
In the case of Clearview Market Square, which is currently under development in the northeast part of the city, only buildings that have been completed and are occupied were included in the survey.
Red Deer has seen significant development of commercial space over the past year, said Garcelon.
“As long as the economy continues to recover, I would not be surprised to see new development.”
A detailed version of Soderquist’s industrial market study can be found on the company’s website (www.soderquist.ca) under “Studies.”