Canada’s Spring 2025 Industrial Market: Steady Absorption Alongside Challenges

In the first quarter of 2025, Canada’s industrial real estate sector demonstrated underlying strength even as cross-border tariff tensions cast a shadow over leasing activity. Overall net absorption reached 4.0 million square feet, of which 1.7 million square feet came from existing buildings. Although modestly higher availability and an influx of sublease space signal some caution, asking rents remained effectively unchanged, reflecting a balance between tenant demand and landlord pragmatism.

National Overview

Net absorption of 4.0 million square feet in Q1 signals persistent occupier appetite for industrial space across Canada’s major markets, according to CBRE reports. Pre-leasing on newly delivered facilities contributed alongside robust leasing of existing properties, underscoring that tenants continue to secure space despite trade-related headwinds.

At the same time, the national availability rate edged up by just 10 bp to reach 5.0%, which was the highest level since 2016, driven by pockets of softening in some regions even as others saw tighter conditions. Sublease inventory, though declining for a third consecutive quarter, still stood at an elevated 13.4 million square feet, well above its ten-year average. Meanwhile, the average asking rental rate held firm at $15.47 per square foot, rising only one cent from the prior quarter, as declines in Canada’s largest hubs were offset by rent growth in smaller centres.

Construction and Future Supply

Development activity contracted further in the first quarter, with the pipeline shrinking by 2.7 million square feet (a 10.6% quarterly drop) to 23.2 million square feet under construction. New starts fell to 2.1 million square feet, signalling that many developers are awaiting clearer market signals before breaking ground. 

Speculative “big box” projects (facilities of 200,000 square feet or larger) accounted for nearly two-thirds of active construction, but less than half of that space is currently pre-leased. If those large-bay buildings complete without tenants in place, the national availability rate could climb by another 30 basis points.

New supply did moderate compared to the previous quarter’s rebound, with 4.8 million square feet delivered in Q1. Toronto, Vancouver and Edmonton together absorbed just over four-fifths of that new space, nearly half of which had been pre-leased ahead of delivery. Beyond Q1, some 18.5 million square feet is scheduled to arrive in the rest of 2025.

Regional Divergences

Regionally, divergent dynamics emerged: Halifax paused new deliveries and saw strong rent growth; Greater Toronto continued to tighten availability; Edmonton benefited from high pre‑leasing on new space; Winnipeg’s development stalled even as rents ticked higher; Waterloo Region offered quality‑focused options; and Montréal balanced moderate rent declines against an influx of Amazon‑vacated space.

Halifax 

Halifax experienced its first quarter without any new deliveries in a year, yet the market still recorded 111,758 square feet of positive net absorption. That tightening drove the availability rate down to 7.2% and supported net asking rents climbing to $13.34 per square foot. Dartmouth and the Halifax core submarkets led absorption, highlighting ongoing demand for well-located industrial properties even as development slows.

Montréal

Greater Montréal’s availability rate rose to 5.6%, up 20 basis points from Q4 and 180 basis points year-over-year, as demand softened slightly in lower-clearance buildings while taller bays remained in stronger tenancy. Quarterly rents eased by 0.6%—well below the 5.2% drop a year earlier—suggesting that rent declines are stabilizing. New deliveries of 909,000 square feet were largely absorbed, but Amazon Canada’s exit could return around 2.3 million square feet to the market later this year.

Ottawa 

In Ottawa, the availability rate held steady at 3.0% despite a slight negative net absorption of 1,300 square feet. Average asking rents rose to an all-time high of $16.99 per square foot, up 0.5% quarter-over-quarter and 9.0% year-over-year. With 453,000 square feet under construction and an additional 6.9 million square feet in planning, Ottawa’s export-oriented manufacturing sector remains sensitive to any new tariff measures, but currently, occupiers are still committing to space.

London

London’s availability climbed to 3.6%; the development pipeline dwindled to 135,000 square feet for an 83.8% drop from its latest peak. Asking rents eased by 1.5% to $10.21 per square foot, reflecting caution in the automotive supply chain. 

Waterloo

In the Waterloo Region, availability rose to its highest level in over a decade at 6.1%, but more than half of that space offers clear heights above 26 feet, positioning the region to benefit when tenants seek higher-quality, larger bays.

Winnipeg

In Winnipeg, just 14,000 square feet of new supply made its way to market – the lowest quarterly total in two years. Availability lowered marginally, and landlords leveraged the scarcity to push average net rents up by $0.45 to $11.42 per square foot. With development on hold, future growth will depend heavily on how quickly existing spaces can be re-leased, according to the CBRE.

Edmonton

Edmonton welcomed 1.1 million square feet of new space—the largest quarterly delivery since mid-2023—of which nearly two-thirds was pre-leased. Southside recorded over 600,000 square feet of positive absorption, and Nisku-Leduc contributed more than 400,000 square feet in small-bay manufacturing deals. Even with slight upticks in availability and vacancy, both measures remain near ten-year lows.

Calgary

For the first time since early 2020, Calgary saw no new supply delivered in Q1. Net absorption turned negative—a clear sign that large-bay vacancies have emerged—while the under-construction total of 1.9 million square feet sits well below the five-year average. Rising property taxes and tariff uncertainty are weighing on both occupier and developer confidence.

Joanna Gerber