Low interest rates in Canada boost industrial acquisition activity

  • The low interest rates of 2020 and 2021 encouraged more users of industrial space to acquire their own premises, given the significant increase in owner-occupier acquisition volume, which peaked at almost $2.5 billion in 2021. The Bank of Canada’s rate increases from March 2022 to July 2023 were followed by a fall in the volume of industrial users’ sales volume, while activity has picked up again since the series of rate cuts that began last June.
  • More favourable financing conditions do stimulate transactions, for both ownership and investment. In addition, the significant rise in industrial rents in Canada (81% cumulative growth since 2018!) has made the owner-occupier option relatively more attractive for end-users. The flexibility of leasing is counterbalanced by the owner-occupier’s ability to secure stable occupancy costs long term.
  • The latest Bank of Canada policy rate cut on January 29th is good news for those financing the acquisition of a property, and we could see more acquisitions by end-users. However, today’s market landscape is quite different than back in 2021. There are significantly more options for quality premises for industrial tenants in today’s leasing market. While rents are still relatively high, they have stopped rising and even declined by 1.7% compared to last year’s peak rents. In 2025, we must also factor in the uncertainty surrounding the potential for US tariffs on Canadian exports, which may push industrial users to choose the flexibility of a lease. For end-users, the choice of leasing or owning has always been a complex one and is even more so in the current context.

Get market intel