Strong Q4 demand, scarce big-box space and new tax breaks are redrawing Calgary’s industrial map
Calgary’s industrial market ended 2025 with its strongest quarter of absorption in three years, sharpening the focus of commercial lenders and mortgage brokers on logistics and manufacturing assets across the region.
Avison Young’s latest report on the Calgary industrial sector highlights a late-year acceleration after a muted start, with vacancy falling and preleasing strengthening even as new supply slowed.
After what the firm called “a relatively slow start to the year, the industrial market accelerated significantly in Q4 with the strongest quarter for absorption since Q3 2022.”
The report said the market is “showing signs of healthy demand, with declining vacancy and strong preleasing activity,” while deliveries of new space “dropped off considerably in 2025 as developers displayed a strategic shift to disciplined development over speculation.”
Total vacancy in Calgary’s industrial market decreased 0.7 percentage points quarter over quarter to 4.0%, with an availability rate of 5.5%.
According to Avison Young, Q4 absorption reached 2.4 million square feet, bringing 2025 absorption to 3.3 million square feet, while 3.4 million square feet remained under construction across 10 developments, roughly 2.5 million of which was preleased.
Large-bay scarcity and sublease rise
The report highlighted “limited availability of large bays,” noting that options over 100,000 square feet became “particularly scarce” as developers turned toward smaller bays and build-to-suit projects.
Avison Young said that with “the development pipeline for large format industrial at relatively low levels plus a sustained leasing environment, it’s possible the market could pivot back to being under supplied in the coming year.”
At the same time, “subleases are becoming a more dominant slice of what remains available.” Sublease inventory in 2025 “currently sits at 1.8 million sf and a sublease vacancy rate of 1.03%,” the firm said, linking the trend to occupiers moving from “'just-in-case' inventory buffers to leaner operational discipline and financial incentives for consolidating space.”
Average asking rents for sublease space softened to $9.68 per square foot in Q4 2025, down from $10.38 a year earlier.
Stable rents, new tax incentives and mortgage implications
Despite tightening fundamentals, “overall average asking rents remained stable throughout 2025 and are currently sitting at $11.63 per square foot,” Avison Young said.
Developers “hesitated to launch new speculative projects given current rental rates and elevated construction costs,” the report added.
That restraint now intersects with federal tax policy. Ottawa’s 2025 budget introduced a “Productivity Super-Deduction” that allows temporary 100% immediate expensing for eligible manufacturing and processing buildings, replacing the usual 10% capital cost allowance and applying to qualifying properties acquired on or after November 4, 2025 and in use before 2030.
External tax and budget analyses have warned that while the measure could spur new industrial construction, its long-term impact on regional supply and pricing remains uncertain.
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