Last Updated on November 11, 2024 by CREW Editorial
In Q3 2024, Halifax’s office and industrial real estate markets demonstrated divergent yet noteworthy trends, driven by varying levels of supply, demand, and market activity. Both sectors experienced shifts in availability and absorption, influencing rental rates and broader market dynamics.
Changes in the office real estate market may be in store, however, if more organizations follow the lead of the Nova Scotia government, who ordered 3,500 non-union employees back to the office by October 15th.
Industrial Real Estate Market
According to the CBRE, Halifax’s industrial real estate market saw record-breaking new supply in Q3 2024, with the addition of 410,080 square feet of modern industrial space.
With this new supply came an increase in availability, pushing the market-wide availability rate to 6.7%, the highest since Q3 2020. The availability increase is partially attributed to slower pre-leasing activity on newly constructed properties, which has allowed for some relief in an industrial market that has previously faced significant tightness in available space.
Despite the increase in availability, net absorption reached 266,000 square feet, showing continued demand for industrial space. However, the amount of space under construction decreased by 410,000 square feet, indicating a potential slowdown in new project commencements.
On the rental rates side, industrial net asking rents have continued their upward trajectory. The average net asking rent rose by $0.66 quarter-over-quarter, reaching $12.02 per square foot. The Halifax and Dartmouth submarkets were notable drivers of this growth, as these areas saw the largest increase in leasing activity and rental rates.
Office Real Estate Market
Halifax’s office market experienced a more modest yet positive quarter, with leasing momentum continuing to improve. For the second consecutive quarter, the market recorded positive net absorption, signalling a gradual recovery. The downtown submarket, in particular, posted positive net absorption for the first time in 2024, while the suburban office submarket continued to serve as the primary driver of leasing activity.
A recent announcement by the Nova Scotia government may be a sign of changes in office usage to come, given its return to office announcement.
The overall office vacancy rate showed a slight improvement, dropping by 10 basis points to 13.5%. This marks a continuation of a downward trend in vacancy, although the improvement remains incremental.
While vacancy rates decreased, there was no corresponding growth in net asking rents across the market. Class B and C office spaces even saw slight decreases in rental rates, which helped spur leasing activity in these asset classes. The average net asking rent held steady at $15.90 per square foot, as the market continues to adjust to evolving demand patterns and tenants capitalize on more affordable leasing opportunities in lower-class properties.
Construction activity in the office sector remains limited, with just 30,000 square feet under construction, indicating no significant upcoming supply to impact the current balance.
