Industrial

Trends to Watch

• Industrial market is set to stabilize and start moving towards recovery

  In 2026, the national availability rate is forecast to plateau and asking rents are expected to reach a floor. Net leasing activity is poised to rebound to historical norms and new supply is on track to taper off.

• Small and mid bay properties will outperform

  Given the current uncertain macro environment, small to mid bay properties offer greater flexibility in being leased compared to their large bay counterparts.

• Trade remains an overarching concern in 2026

  The path for global trade remains uncertain and CUSMA is scheduled for a formal review in July. While some opportunities may arise, the preservation of the North American free trade agreement will be critical for bringing stability to the industrial market.

Market fundamentals to stabilize with recovery on the horizon

Heading into 2026, industrial market fundamentals in Canada are largely balanced and moving towards an inflection point. Despite trade headwinds and uncertainty throughout 2025, leasing demand remained remarkably resilient. With momentum expected to continue building, net absorption is forecast to rebound further to over 20 million sq. ft. in 2026, recovering to levels back in line with national pre-pandemic norms.

Peak availability at the national level will likely be reached in the coming quarters but is ultimately forecast to end 2026 just marginally lower year-over-year at 5.5%. With increased availability compared to prior years and pandemic-era leases set to roll over, this will drive a greater focus on flight-to-quality in the market over the next couple of years.

After two years of declines, national average asking rents are also poised to level off and reach a floor in 2026. In fact, some submarkets have already begun to see a return to positive rent growth in late 2025. However, availability rates will need to meaningfully drop before national rent growth starts to rebound.

New supply is on track to taper off in 2026 and will start to have a diminishing impact on market availability. In particular, speculative development is set to fade by the end of the year and design build projects are making up more of the construction pipeline. At the same time, pre-leasing on new supply has been steadily improving as well. Nearly 20 million sq. ft. of space is still expected to deliver in 2026, but this will be the lowest annual amount seen in eight years.

In the current uncertain macroeconomic environment, small to mid bay properties will be favoured over their large bay counterparts. These smaller bay buildings offer greater flexibility in being leased compared to large bay facilities that rely on significant commitments only a handful of occupiers can reasonably meet.

Trade remains an overarching concern for the industrial market in Canada. Especially in 2026, as a review of CUSMA is scheduled to take place in July. The resilience of the Canadian economy in the face of U.S. tariffs so far has been mainly due to the North American free trade agreement, and its preservation will be critical to stabilizing the industrial market.

Amid the uncertainty surrounding global trade, there are potential opportunities for the Canadian industrial market as nearshoring returns as a relevant theme once again. Federal government tax incentives on manufacturing and processing facilities could further boost design build construction activity across the country.