Canada’s industrial real estate market nears inflection point as leasing stabilizes: CBRE

Canada’s industrial real estate market is showing early signs of stabilization after two years of cooling conditions, with data from CBRE indicating that leasing activity remains resilient even as supply pressures and macroeconomic uncertainty continue to shape performance across major logistics hubs.

CBRE’s Q1 2026 Canada Industrial Figures report shows national net absorption reached 4.2 million sq. ft. during the quarter, nearly double the trailing three-year average. However, the gains were heavily concentrated in just two markets — Toronto and Waterloo Region — underscoring uneven demand conditions across the country.

Toronto alone accounted for more than 1.6 million sq. ft. of absorption in existing inventory, while Waterloo Region saw strong pre-leasing activity and an additional 317,000 sq. ft. of positive absorption. Overall, pre-leasing represented 52.8 per cent of total national absorption, highlighting the continued importance of forward commitments in new development.

Despite this momentum, CBRE cautioned that a weaker economic outlook could weigh on leasing activity later in the year.

On the supply side, Canada’s industrial availability rate held steady at 5.5 per cent, signalling what CBRE describes as a potential inflection point in the market. Six of the 11 tracked markets recorded flat or declining availability during the quarter, suggesting conditions may be beginning to stabilize after a period of sustained increases.

Year-over-year comparisons show a more mixed picture, with most markets still posting higher availability levels. The exception was Alberta, where Calgary and Edmonton were the only major markets to record declines.

Sublease availability remains elevated at a record 15.3 million sq. ft., though the sublease rate has held steady at 0.7 per cent for nine consecutive quarters. Most of the available sublease space is concentrated in Toronto and Montreal, which together account for nearly two-thirds of the national total.

On the development front, construction activity remained active but disciplined. The national pipeline rose to 24.8 million sq. ft., with speculative projects accounting for 61.9 per cent of new starts, a notable rebound from late 2025 levels. However, overall construction still represents just 1.2 per cent of national inventory, indicating a relatively conservative development environment.

Rents continued to ease, with the national average net asking rate declining 3.7 per cent year-over-year to $14.91 per sq. ft. Despite this, six markets posted quarterly rent growth, led by London, Waterloo Region and Victoria, suggesting localized tightening in select submarkets.

CBRE expects the market to move toward broader stabilization in 2026, with availability peaking and rents bottoming out before gradually recovering. Net absorption is forecast to rebound toward 20 million sq. ft. as conditions normalize, though the outlook remains sensitive to trade dynamics, including the upcoming Canada-U.S.-Mexico Agreement (CUSMA) review.

The report also highlights a structural shift in demand toward small and mid-bay industrial space, which CBRE says is better positioned to attract leasing activity in an uncertain macroeconomic environment.

For logistics users and distributors, the findings suggest a market transitioning away from pandemic-era volatility toward a more balanced environment, with increased choice for tenants, but still selective pressure in key distribution hubs like Toronto and Waterloo Region.