Canada Industrial Figures Q1 2025

Executive Summary

• Despite significant tariff uncertainties, net absorption remained relatively solid in Q1 2025 and totaled 4.0 million sq. ft. with 1.7 million sq. ft. attributable to leasing within existing stock. However, many markets cited the ongoing trade conflict as a major headwind that could temper demand over the next couple of quarters.
• The national availability rate in Q1 2025 inched higher by 10 bps quarter-over-quarter to reach the 5.0% mark for the first time since 2016. While there were pockets of stronger leasing activity, these were offset by continued softening in other markets for an overall muted quarter in Q1 2025.
• While the development pipeline continues to fall as construction starts appear to be troughing, big box projects currently make up 63.4% of the active construction with significant amounts of that space still available.
• Rents remain under pressure from continued declines the three largest markets, however, the national average effectively held flat in Q1 2025 rising $0.01 to $15.47 per sq. ft.

Leasing momentum in Q1 2025 overshadowed by tariff uncertainty

Following the rebound in net leasing activity at the end of 2024, national net absorption remained solid and totaled 4.0 million sq. ft. in Q1 2025.

While pre-leasing on new supply that delivered in Q1 2025 helped boost total net absorption, there was also healthy leasing activity among existing stock that totaled 1.7 million sq. ft. of positive net absorption.

Six of ten markets recorded positive total net absorption in Q1 2025 and even after removing the impact from pre-leasing, all six markets would still have seen positive net absorption led by Toronto and Vancouver at 1.3 million sq. ft. and 1.0 million sq. ft., respectively.

However, many markets cited the ongoing tariff and trade uncertainties as a major headwind that tempers the outlook for leasing demand over the next couple of quarters.

In particular, Montreal also faces the additional headwind of Amazon’s recent departure from Quebec that is expected to impact the market in the latter half of the year.

Availability rate inches higher to reach 5.0% mark

The national availability rate continues to rise, however, the pace slowed in Q1 2025 with a marginal 10 basis point (bps) quarterly increase. This brings the national average rate to the 5.0% mark for the first time since 2016.

Pockets of stronger leasing activity were offset by continued softening in other markets for an overall muted quarter in Q1 2025.

Every market’s availability rates remain higher year-over-year apart from Edmonton which has seen its availability rate contract 70 bps.

London saw the largest quarterly increase in its availability rate in Q1 2025, which rose 80 bps to 3.6% and led to the largest year-over-year increase as well of 250 bps.

Calgary also recorded a notable quarter-over-quarter increase in availability of 50 bps. On the other end, the largest quarterly decreases in availability rate were in Halifax and Vancouver with 70 bps and 40 bps declines, respectively.

Sublease levels continue to modestly decline

While the total amount of space available for sublease declined for the third quarter in a row, it remains elevated at 13.4 million sq. ft. and holds well above the historical 10-year average of 6.9 million sq. ft.

The national sublet availability rate improved modestly by 10 bps quarter-over-quarter to 0.6% and returns to its level from one year ago.

Sublets are most prominent in Vancouver and Ottawa, where sublease space accounts for 18.5% and 18.1%, respectively, of total available space in Q1 2025.

The largest year-over-year increases in sublet availability rates in Q1 2025 were seen in Vancouver and London, where rates rose 30 bps and 20 bps, respectively.

Meanwhile, notable decreases in sublet availability were also recorded in Calgary (-30 bps) and Montreal (-20 bps).

Construction starts have largely troughed

The national construction pipeline shrank further in Q1 2025, falling 10.6% quarter-over-quarter or by 2.7 million sq. ft. to total 23.2 million sq. ft. of space currently under development.

This brings national construction activity as a share of total inventory down to its pandemic era low of 1.1%.

Development activity is on track to continue falling as construction starts drop to a 5-year low of 2.1 million sq. ft.

In fact, Toronto is the only market that continues to launch meaningful amounts of new industrial projects, accounting for 1.9 million sq. ft. of the starts in Q1 2025.

Big box makes up the bulk of active construction with much still available

Construction activity continues to be largely concentrated in Toronto and Vancouver, which account for 44.7% and 20.5% of the total Canadian industrial pipeline, respectively.

The majority of the development pipeline consists of speculative projects representing 73.3% of construction with design build accounting for 26.6%.

Pre-leasing activity on the space under construction remains modest with 45.1% of projects currently having commitments in place.

Notably, the big box category (facilities 200,000 sq. ft. or larger) makes up the largest segment of the construction pipeline that also has a large amount of space still available. Given the current uncertain business environment, this could represent up to 8.1 million sq. ft. of big box space that could potentially deliver vacant over the coming quarters and lift the national availability rate 30 bps.

New supply on track to rise in the coming quarters

New supply moderated from last quarter’s strong rebound and totaled 4.8 million sq. ft. in Q1 2025.

Toronto, Vancouver and Edmonton received the vast majority of the new supply deliveries, combined accounting for 80.5% of the total new supply in Q1 2025.

Pre-leasing levels on the space that delivered in Q1 2025 recorded a slight improvement to average 48.6% nationally.

New supply is expected to rise over the next couple of quarters with 18.5 million sq. ft. of space currently on track to deliver over the rest of the 2025.

National rents remain under pressure from the three largest markets

The national average asking net rental rate dropped 3.3% year-over-year to $15.47 per sq. ft. in Q1 2025.

Despite some relatively strong rental rate growth seen in half of the markets in Q1 2025, continued declines in the three largest industrial markets have weighed on the national average.

Halifax saw the largest year-over-year increase in rental rates with growth of 19.4% as new availability continues to lift market rents.

On a quarterly basis, the national average rental rate effectively held flat with a $0.01 quarterly increase.

Sale prices continue to adjust to market dynamics

The national average asking sale price continued on its downward trajectory, recording its seventh consecutive year-over-year decline in Q1 2025 to $310.53 per sq. ft.

Sale price growth was led by Winnipeg and Halifax with 18.6% and 8.3% year-over-year increases, respectively.

Decreases in sale prices were largest in Montreal, London and Vancouver with 10.5%, 8.9% and 7.4% year-over-year declines, respectively.

On quarterly basis, the national average sale price saw a marginal 1.6% increase quarter-over-quarter.