Western Canada's industrial real estate sector enters 2025 with supply-demand dynamics that remain fundamentally supportive of asset values, despite a moderation in leasing velocity relative to the exceptional conditions of 2022-2023. Vacancy in the Edmonton and Calgary submarkets has risen from historic lows of 1.2% to a still-tight 3.8%, while net absorption continues to exceed new supply by approximately 1.4 million square feet annually.
Our analysis identifies three acquisition targets in the Calgary Southeast submarket that meet Prairieview's return requirements, with risk-adjusted IRRs of 12.4-14.1% on a five-year hold basis. We recommend proceeding to LOI on the Foothills Logistics Centre at a target basis of $285/sf.
Net absorption across the Calgary and Edmonton industrial markets totaled 4.2 million square feet in 2024, representing a 22% decline from the peak activity of 2022 but remaining materially above the 10-year average of 2.9 million square feet. Leasing is increasingly concentrated in the 50,000-200,000 square foot range, driven by third-party logistics operators and e-commerce fulfillment tenants.
Effective rents have stabilized following two years of aggressive growth. Our survey of 34 transactions completed in H2 2024 indicates weighted average effective rents of $17.20/sf in Calgary and $14.80/sf in Edmonton, representing year-over-year growth of 3.2% and 1.8% respectively.
| Asset | GLA (sf) | Asking Price | In-Place NOI | Market Cap Rate | 5-yr IRR |
|---|---|---|---|---|---|
| Foothills Logistics Centre | 187,400 | $54.2M | $3.1M | 5.7% | 14.1% |
| Stoney Trail Industrial | 142,000 | $39.8M | $2.2M | 5.5% | 12.9% |
| East Hills Distribution | 98,500 | $26.1M | $1.4M | 5.4% | 12.4% |
| Total / Weighted Avg | 427,900 | $120.1M | $6.7M | 5.6% | 13.2% |