Industrial Market Holding Firm
Over the past six quarters, the Canadian industrial vacancy rate has remained relatively stable, with quarter-over-quarter (QOQ) fluctuations limited to within 20 bps. A similar trend has been observed across most major Canadian markets, with vacancy rates showing little movement in recent quarters. Among the major markets, Vancouver continues to post the lowest industrial vacancy rate at 4.4%, while Montreal remains the highest at 7.2%.
Although industrial absorption slowed from last quarter to 1.5 million square feet (msf) in Q3 2026, it marked the fifth consecutive quarter of positive absorption. All major Western Canadian markets, along with Toronto, recorded positive absorption during the quarter, while new vacancy outpaced occupancy gains in Ottawa and Montreal. New leasing activity remained strong at 16.1 msf, nearly unchanged from the previous quarter. Year-to-date leasing totals have now reached 48.8 msf, exceeding the volume recorded during the same period in 2025.
The national average net asking rent ended Q3 2026 at $14.85 per square foot (psf), virtually unchanged from the previous quarter. This marks the first quarter in two years in which the national average net asking rent did not decline on a QOQ basis. While rents decreased in Toronto and Vancouver, increases in Calgary, Edmonton, and Montreal were sufficient to keep the national average stable. Within the major markets asking rental rates continue to be elevated for spaces under 25,000 square feet (sf), averaging $16.87 psf, while remaining more competitive for spaces above 50,000 sf at an average of $14.80 psf.
After declining for two consecutive quarters, direct vacancy increased slightly from the previous quarter. Sublet vacancy followed a similar trend, recording a modest uptick. As a share of total vacancy, however, sublet space has remained relatively stable throughout 2026, hovering around 10.0%. The composition of sublet availability has also changed little in recent quarters, with 77.0% of listings exceeding 10,000 sf and nearly 18.0% larger than 50,000 sf. Approximately two-thirds of sublet listings are located in industrial properties built more than 25 years ago.
Leasing momentum remained steady throughout 2026. Year-to-date activity has been concentrated in the under-25,000-sf segment, which accounts for nearly 80% of all transactions. Demand for larger blocks of space has also persisted, with 21 transactions exceeding 250,000 sf completed year-to-date, compared with 12 at the same point in 2025. These larger transactions have largely been concentrated in newer properties, with buildings completed since 2020 recording the largest average deal size at nearly 59,000 sf. By leased square footage, demand continued to be driven by manufacturing and transportation/warehousing occupiers, consistent with trends observed through the first three quarters of 2025. Wholesale trade occupiers have also recorded a notable increase in activity, with leased square footage rising nearly 87% compared with the same period last year.
New supply totaled nearly 4.5 msf this quarter, the highest quarterly delivery volume of 2026, bringing year-to-date completions to 10.1 msf. Speculative developments continued to dominate deliveries, accounting for approximately 91.0% of all new supply completed so far this year. Nearly all projects delivered year-to-date have been smaller than 300,000 sf. Speculative developments completed this quarter were approximately 61.0% preleased at delivery, limiting the amount of vacant space entering the market and minimizing the impact on the overall vacancy rate.
Construction activity increased slightly from the previous quarter, with 27.8 msf currently under construction, including approximately 7.3 msf scheduled for delivery by year-end. While speculative developments continue to represent the majority of space underway, the gap between speculative and build-to-suit projects has narrowed slightly over the past year. The composition of projects under construction has also shifted. In Q3 2025, developments under 100,000 sf represented approximately 57.0% of all projects underway; that share has since fallen to 39.0%. Conversely, projects ranging from 100,000 to 300,000 sf now account for 47.0% of active developments, up from approximately 27.0% one year ago.
