Q2 2024

Canadian industrial market report

Avison Young’s quarterly industrial report. We pledge to deliver comprehensive market insights to navigate in this period of limited transaction activity and uncertain market conditions.

National industrial market trends

01

Post Covid turnover

The e-commerce boom combined with supply chain disruptions during the COVID era had rushed logistics and distribution companies to secure warehousing space as soon as possible, against a backdrop of acute space shortage. The 3-to-5-year leases signed during this period at historically high rental rates are gradually expiring. Tenants who may have overstocked on space are now reviewing their requirements on a backdrop of significantly more availabilities and bargaining power than in 2020-2022. As market conditions stabilize, it is a good time to proceed with right-sizing, relocations and rental rate negotiation strategies.

02

Smaller is better

As demande for  logistics and distribution and large fulfilment centres cools off, there are more lease and sub-lease options across the country. Vacancy rates for big-bay industrial are now higher than for small-bay. Demand for small-bay is positive, but new supply is limited due to higher construction and land costs. This supply-demand imbalance has spurred investor interest. Developers are trying to adapt their offering to meet demand from smaller tenants, either by subdividing or developing industrial condos, as has long been done in Vancouver.

03

Sound fundamentals

The steady  increase in vacancy rates and fall in rents since the start of 2023 is a correction of a market that overheated. Otherwise, industrial market fundamentals remain sound, and the economic drivers of demand for industrial space are pointing in the right direction for 2025: falling interest rates, weaker loonie, GDP growth forecast at 1.4% (0.6% in 2024) and industrial output at 1.7% (0.2% in 2024). The incremental progression of e-commerce as well as the development of a domestic battery industry, the life sciences, and energy sector prospects are also positive drivers. Noting the slowdown in new developments since 2023, supply may not be sufficient to meet a significant resurgence in demand. 

  • Principal, Director Market Intelligence, Canada
  • Research, Market Intelligence

  • Research Manager, Toronto Suburban Markets
  • Research, Market Intelligence