Tightness in key real estate sectors now evident
Canada’s industrial real estate market recorded its first national vacancy decline since 2022 in Q1, with 3.7 million square feet of absorption outpacing 3.0 million square feet of new supply.
Colliers said the national industrial vacancy rate fell to 3.5% in the first quarter, while available industrial space reached 105.4 million square feet. Total industrial vacancy stood at 76.0 million square feet, and average asking net rent was $14.74 per square foot. Five of six major markets posted quarter-over-quarter vacancy declines.
The Q1 figures follow a period of higher supply and softer demand that began in late 2022. Morguard said national industrial leasing conditions remained relatively healthy through 2025 despite higher supply risk, with nearly 3.4 million square feet absorbed in the first half of last year. Real estate company JLL also said industrial vacancy plateaued at 5.2% in Q4 2025 after 12 straight quarters of increases, with new development slowing.
Development activity stays in focus
Industrial construction starts totaled 5.6 million square feet in Q1, with Toronto, Vancouver and Calgary accounting for 76% of all new projects. The national industrial pipeline reached 24.5 million square feet.
Colliers said the latest figures point to a market balancing after several years of tight conditions followed by elevated speculative development.
“We are seeing a notable shift in developer confidence; the recent dominance of design-build projects has pivoted back toward speculative construction,” said Adam Jacobs, head of research I Canada.
“With the total national pipeline now sitting at 24.5 million square feet, the market continues to maintain a healthy and consistent level of active development,” he added.
The financing backdrop in 2026 may be more supportive than last year, with lenders indicating greater willingness to deploy capital. CBRE said 81% of lenders plan to increase origination volumes this year, while 26% expect to raise real estate lending by at least 20%. It also said 68% of lenders plan to actively or very actively bid on deals.
Prime office inventory tightens
National office vacancy tightened in Q1, falling 100 basis points year over year to 13.6%, one of the largest declines since the onset of COVID.
Colliers said office net absorption reached 2.1 million square feet in Q1, with downtown markets posting 2.7 million square feet of positive absorption while suburban markets recorded negative 560,744 square feet. Total office vacancy stood at 88.2 million square feet and average asking net rent was $21.50 per square foot. Less than 2.0 million square feet of office space is now under construction nationwide.
Colliers said leasing remained concentrated in downtown Class A buildings, while return-to-office mandates continued to support demand in major urban centres. Firmer office leasing conditions through 2025, with stronger demand for higher-quality space and limited new supply expected over the next several years.
“The decline in vacancy we're seeing isn't a statistical blip; it's the result of a structural rightsizing,” Jacobs said.
“With conversions removing record amounts of obsolete stock and a near-total halt in new builds, the window to secure top-tier space is closing, and we expect this scarcity to drive significant competition through the remainder of 2026.”
Regional conditions differ across markets
Vancouver’s industrial market posted more than 1.1 million square feet of net absorption in Q1, lowering vacancy to 3.2%. Calgary recorded 574,273 square feet of industrial absorption, with vacancy at 3.4%. Edmonton’s industrial vacancy fell to 4.1%, while Regina had the country’s lowest industrial vacancy at 2.3%. Saskatoon’s industrial vacancy stood at 2.7%.
On the office side, Vancouver’s vacancy declined to 9.5%, Toronto’s to 10.9% and Calgary’s to 22.9%.
Edmonton’s office vacancy rose to 17.5% after approximately 40,000 square feet of negative absorption, driven mainly by a large West End vacancy. The city still recorded its largest office transaction in a decade after ATCO relocated to the former Canadian Western Bank Tower at 10035 105 St.
Colliers said geopolitical uncertainty and inflation risks remain factors for the wider economy, but first-quarter leasing data showed firmer commercial real estate conditions at the start of 2026.
