Canada’s industrial availability rate crept slightly upwards during the first quarter of 2025, while office vacancies continued to hover in the same general range they’ve occupied since mid-2023. Newly released statistics from CBRE Canada peg the average office vacancy at 18.7 per cent across 10 major urban markets, along with a 5 per cent average industrial availability rate for the same markets.
The 10 basis points (bps) uptick in industrial availability came about as nearly 4.8 million square feet of new supply was delivered over the course of the winter. Most regional markets registered positive net absorption, amounting to nearly 4 million square feet nationwide.
The national average net asking rent remained steady, at $15.47 per square foot (psf). However, the four largest markets saw year-over-year declines, ranging from a 0.3 per cent drop in Calgary to a more significant 7.1 per cent decrease in Vancouver. Even so, Vancouver still commands the highest rents among the 10 markets, at $19.96 psf.
Construction activity continues to ebb. Newly initiated projects amounted to a 5-year low of 2.1 million square feet for the quarter, with about 90 per cent of those starts occurring in Toronto. The construction pipeline is also emptying out, shrinking by about 2.7 million square feet since Q4 2024, and now equivalent to just 1.1 per cent of the total industrial inventory. Nevertheless, CBRE analysts note that a spate of completions are coming this year, with about 18.5 million square feet of new supply destined to hit the market by the end of 2025.
Almost three-quarters of the supply under construction is speculative development, while about 45 per cent of space across all in-progress projects has now been pre-leased. Together, Toronto and Vancouver account for 65 per cent of the construction pipeline, with the predominant share of that in Toronto. CBRE analysts flag a large amount of still unclaimed space in big box facilities, exceeding 200,000 square feet.
“Given the current uncertain business environment, this could represent up to 8.1 million sq. ft. of big box space that could potentially deliver vacant over the coming quarters and lift the national availability rate 30 bps,” they note. “Many markets cite the ongoing tariff and trade uncertainties as a major headwind that tempers the outlook for leasing demand over the next couple of quarters.”
Familiar patterns were evidenced in the office sector in the first months of 2025, with about 408,000 square feet of negative absorption registered across the 10 markets. That was largely attributable to Montreal, while, elsewhere, gains in four markets essentially evened out with small losses in the other five.
The large gap between trophy assets and Class B/C inventory also remained relatively constant, although there was a slight loosening in both categories with the vacancy rate in trophy assets rising 70 bps to 11.2 per cent and the Class B/C rate nudging up 10 bps to 25.3 per cent. Canada-wide, the downtown office vacancy rate improved by 10 bps, inching down to 19.9 per cent, while the suburban vacancy rate weakened in the same increment, nudging up to 17.3 per cent.
The national average Class A net rent posted a more obvious gain, rising to $26.25 psf from $25.75 psf in Q4 2024. Among markets, Vancouver boasts the lowest vacancy rate, at 10.7 per cent, and the highest average net rent at $37.65 psf. Toronto’s office vacancy rate (19.7 per cent) exceeds the national average, but so too does its average net rent ($29.18 psf).
Nationwide, less than 120,000 square feet of new supply was completed in Q1, all of it in Toronto’s suburban market. As with the industrial market, construction activity has quieted, but there is still about 2.2 million square feet of office in the pipeline in Toronto, about 590,000 square feet in Vancouver and about 209,000 square feet in Montreal. In-progress supply is about 52 per cent pre-leased.
