Canadian Industrial Vacancy Declines, Rent Growth Expected by 2027
CoStar forecasts Canada's industrial vacancy rate will fall below 4% by the end of 2027, with positive rent growth returning late that year. Net absorption has improved to about 5 million square feet per quarter, and the development pipeline is shrinking. Risks to the outlook include trade uncertainty, higher operating costs, and slower population growth.
CoStar's revised forecast reflects a notable shift from the market's recent trajectory. After vacancy peaked at 4.75% in 2025, the current rate of 4.5% marks the beginning of a tightening cycle. The improvement is attributed to a rebound in net absorption, which has stabilized at roughly 5 million square feet quarterly after a negative period in early 2025, alongside a significant reduction in new construction projects.
A concrete example of this recovery is Pure Industrial's recent lease of the entire 411,000-square-foot former Hudson's Bay distribution centre in Richmond, British Columbia. This large transaction helped reduce availability in the Metro Vancouver area. CoStar projects absorption will accelerate to 7.5 million square feet per quarter through 2027 before normalizing, indicating the anticipated rent growth will stem from a balanced market rather than a surge in demand.
This forecast could signal relief for businesses that have faced volatile leasing costs, potentially stabilizing supply chain expenses for retailers and manufacturers. A tighter industrial market may lead to higher rents for tenants by 2028, which could be passed on to consumers through goods pricing. Conversely, property owners and investors could see improved asset values. However, the outlook remains sensitive to trade policy changes and economic growth, meaning the actual impact on jobs and business operations will depend on broader macroeconomic conditions.