Strong demand is forecasted for the Canadian industrial market over the next 12 months as tight conditions prevail.

According to Avison Young’s 2018 commercial real estate forecast report for North America and Europe, there are regional differences, but overall vacancy levels are half of those in the office markets.

E-commerce is driving a diverse and growing tenant base, pushing the sector to quickly adapt as some markets face a decreasing supply of developable land.

“While the industry has been focusing on fulfilling consumers’ infatuation with faster last-mile delivery of goods to where they live or work, stakeholders will also have to prepare for the sheer volume of inevitable merchandise returns, which may require a different type of facility to process,” said Bill Argeropoulos, principal, practice leader, research (Canada) for Avison Young.

At the end of 2017, Canada’s two-billion-square-foot-plus industrial market displayed an overall vacancy rate of 3.9 per cent. Demand is expected to hold the vacancy rate below 4 per cent in 2018. With the exception of Halifax, single digit vacancy rates are the norm, with six of the 11 markets surveyed at or below the Canadian average.

Vancouver claimed the nation’s lowest vacancy rate at 1.6 per cent and second-lowest among North American industrial markets in 2017. Vancouver and Toronto accounted for 73 per cent of total development last year. Both cities remain “magnets for new industrial development.”

Though it is expected to improve in 2018, vacancy in Halifax was the highest and also posted the greatest year-over-year change. Eastern markets make up 70 per cent of Canada’s industrial stock. They declined in vacancy to 3.5 per cent near the end of 2017 compared to the end of 2016. This rate is expected to be repeated by year-end 2018.

Western markets are projected to see vacancy retreat marginally in 2018.

In the North American context, Vancouver, Toronto, Winnipeg and Ottawa claimed four of the 10 lowest vacancy rates in 2017. Avison Young expects Waterloo Region to join these markets in 2018.