The James Snow Business Park in Milton, Ont., has been fully leased across its 1.55-million square feet of space across four buildings. At the centre of the new industrial park is the 1.1-million-square-foot lease with ID Logistics.Supplied/Oxford Properties Group
Steady demand for warehouse space and a slowdown in new supply continues to lower Canada’s industrial vacancy rate following years of falling rents and rising vacancies.
In a recent report, Colliers says the national vacancy rate fell to 3.3 per cent in the second quarter of this year, with the average reaching between two and three per cent in most major markets. This is down from 3.5 per cent in the first quarter, which marked the first national decline since 2022, with some markets such as Montreal hovering around five per cent.
While U.S. tariffs and geopolitical uncertainty raised construction costs, delayed investment in new logistics facilities and slowed industrial leasing in 2025, investors and developers say the market is beginning to move past these challenges.
“Commercial real estate has always required a long-term lens and long-standing structural tailwinds remain in place,” says CBRE Canada’s managing director of research, Marc Meehan, referring to population growth and land availability constraints that continue to underpin the market.
Fulfilment centres, storage sites and factories
According to the Colliers report, the Greater Toronto Area is the tightest market in the country, with the vacancy rate falling 70 basis points over the last two quarters to 2.2 per cent and asking rents stabilizing to about $16.22 per square foot, down just a few cents quarter over quarter.
At the same time, CBRE says the national industrial availability rate – the percentage of unrented warehousing, manufacturing and distribution space – eased to 5.5 per cent in the second quarter, the first decrease since the third quarter of 2022.
Adam Jacobs, head of research at Colliers Canada, says the country’s industrial market is supported by the limited availability of small storage centres and factories, as well as the sustained – yet slowing – demand growth of large e-commerce fulfilment warehouses.
He says fulfilment centres built at record levels in 2023 and 2024 resulted in excess inventory that overshadowed smaller industrial sites.
However, fulfilment warehouse construction has eased amid the Canada-U.S. trade war, pushing industrial construction to its lowest level in more than eight years, says Jeff Miller, co-head of asset management and development Canada at Toronto-based global real estate developer Oxford Properties Group.
Industrial market changes
In its second-quarter industrial report, CBRE says national industrial new supply deliveries – complete and tenant-ready space – amounted to 2.4-million square feet, the lowest quarterly amount since 2017. The slowdown of new warehouse constructions has helped reduce the amount of empty space and ease the decline in rents.
“We feel very bullish on not having a lot of new supply coming into the market,” Mr. Miller says. “If the demand maintains its current pace, I feel good about pressure and rents starting to creep up again.”
Due to a dip in warehouse constructions, he says there soon may not be enough supply as the market looks to move forward again. He cites Oxford’s fully leased 1.55-million square feet of space across four buildings at the James Snow Business Park in Milton, Ont., which is anchored by a 1.1-million-square-foot lease at the park’s largest building with logistics provider ID Logistics.
The buildings, which were completed in 2023, were fully leased by mid-2026. They contain the largest speculative industrial lease in Canada and one of the largest industrial leases on record in the country, Oxford says in its market disclosure.
The four buildings are the first phase of an $825-million, 246-acre greenfield site industrial development just west of Toronto. The campus will eventually total to 14 buildings reaching 3.3-million square feet, with completion timelines dependent on market demand.
Mr. Jacobs of Colliers says the James Snow project initially raised eyebrows among market insiders as potentially being overbuilt.
However, Mr. Miller says the property’s leasing success bodes well for its multiyear master-plan.
The buildings located at the James Snow Business Park were completed by 2023 and fully leased this year. Oxford says they contain the largest speculative industrial lease in Canada.Supplied/Oxford Properties Group
The role of REITs
According to Mr. Miller, industrial tenants are increasingly pre-leasing, with commitments lined up for 40 per cent of the roughly nine-million square feet of speculative development under construction in the GTA.
Pre-leasing, which has been historically common in the industrial market, means a lease is signed before construction begins or is finished. It aims to lower developers’ financial risks and set pricing trends for new buildings.
Small-cap real estate investment trusts (REITs) with stock market values below $2-billion are also increasing their commitments to Canada’s industrial market.
For example, Montreal-based PROREIT recently completed an acquisition of 17 industrial properties, 13 in Québec City and four in Winnipeg totalling 771,159 square feet of gross leasable space, for an aggregate price of $136.8-million.
Focused on high-quality, mid-sized industrial properties in primary and secondary markets, the company agreed in July to acquire the four additional Winnipeg buildings, which total 165,000 square feet of gross leasable space, for $21.7-million.
PROREIT says it is focused on secondary markets with strong economies and where properties are priced more competitively than in major centres.
“I have the fear, just as everybody else, over the economy in general,” says PROREIT CEO Gordon Lawlor. “But if [Canada] executes on some of these strategies, including increased oil and gas and natural minerals production, [and] all industrial laden-type businesses, we’re pretty bullish on the market here.”
U.S. influence on the industrial market
Mr. Lawlor says the U.S tariffs and other “noise” south of the border haven’t affected PROREIT’s portfolio to date. “We still have to make decisions here in Canada,” he adds.
With more than 90 per cent of its assets in the industrial class and the remainder in office and retail, PROREIT has a 96 per cent occupancy rate across its portfolio and an average lease term of 4.6 years.
Mr. Lawlor says the company expects to acquire more industrial properties over the next few years, adding that PROREIT bought its latest assets at undermarket prices and with attractive financing structures. These acquisitions are expected to increase cash flow over three years, contribute to positive tenant renewals and result in higher lease rates.
Another example of a REIT focusing on primary and secondary markets is Skyline Industrial.
The fund out of real estate company Skyline Group has fully leased the Bayers Lake Industrial Centre in Halifax. In its market disclosure, Skyline says the two-building, 400,688-square-foot centre is the largest-ever speculative industrial lease in Halifax, accounting for most of the region’s industrial space leased year to date.
In a statement, the REIT says the buildings are leased to three separate tenants, including ID Logistics.
“Halifax is experiencing a resurgence in its industrial market demand following a quiet 2025,” says Skyline Industrial president Mike Bonneveld. “By developing Bayers Lake in the heart of what is known as the Ultra Atlantic Gateway, we were able to capitalize on that demand.”