Amid an unpredictable trade war between Canada and the United States, facility management professionals are scrutinizing alternatives to American-made products and witnessing unity form within the local sector. Despite an ever-changing situation, which may gain more clarity after April 2, many are also preparing to mitigate potential tariff costs.
Peel Region council is considering a motion this week that, if adopted, will direct staff to implement procurement strategies prioritizing non-U.S. goods and services where feasible, said Dana Fountain, advisor for sustainable procurement with Peel Region. He is supporting procurement strategies to help internal buyers navigate the uncertainty of tariffs and recently spoke on an industry panel, hosted by IFMA’s Greater Toronto and South Central Ontario.
The strategies related to the motion aim to support local Canadian businesses, workers and residents, while creating strong long-term economic resilience. “When tariffs are a distant memory as COVID is today, we’ll look back and reflect upon how much stronger our supply chain is now, how less susceptible to disruption and how we’ve removed barriers between interprovincial trade,” shared Fountain.
More specific details will be highlighted in a council report in April. For now, he said to expect common strategies among municipal partners, such as amending by-laws to remove provisions that prohibit local preferences and commitments to increasing trade agreement minimum thresholds to garner more flexibility with invitational procurement processes. Using sustainable procurement initiatives will also help leverage sustainable diverse supplier programs and greenhouse gas reduction commitments to spur local procurement.
So far, he has witnessed a remarkable outpouring of cooperation among local governments, towns, regions, cities and municipal associations. “It’s a spirit of collaboration I haven’t seen since the pandemic. Municipal leaders and staff are unifying in their response to these challenges.”
Pierre Beaulieu, senior director and head of strategic sourcing at JLL Canada, sees impacts to some degree in specific categories, such as furniture and new properties that require janitorial equipment. HVAC units could potentially see a 8 to 10 per cent price increase, which would affect large capital programs more substantially. Preordering is a suggested mitigation strategy.
“We’ve started seeing some clients and non-clients doing pre-purchases of HVAC equipment, which drained all the stock that was already manufactured. So, there might be more delays in getting new HVAC units,” he cautioned. “There are also going to be impacts from finding new service providers that are either manufacturing in Canada or non-tariff countries, which could slightly drive up the cost.” He is already seeing some clients requesting to remove U.S. service providers from their supply chain.
To avoid deferring projects or extreme cost fluctuations, he advises giving service providers and suppliers a long-term view of the capital expenditure plan so they can pre-purchase or account for additional delays. As well, determining what percentage of a product is susceptible to tariffs will help mitigate risk.
Phillip Hornby, president of Anthony Allen Office Furnishings, has been leading his dealerships in the Manitoba market for more than 30 years. Many of his clients are in the midst of capital projects, “We feel it is safe to say that when the tariffs are on, we’re going to see a 4 to 8 per cent increase in pricing in our industry for most of the basic office products,” he said, adding this will hit harder with metal goods for elements like storage and mailrooms.
His company, which represents 40 different manufacturers around the world, is asking vendors to break down where components are being manufactured as more clients demand Canadian-made products.
“My advice to our clients: if you’re in the thick of a big project, sit down with your vendors, negotiate pricing right now and establish the content of your purchases,” he said. “Work with your vendors to see if there are alternate products that come from other sources that aren’t impacted by the tariffs.” He also advises that facilities and purchasing teams establish how much of the tariff suppliers are willing to absorb over the next 60 to 90 days.
Impacts on various asset classes
Industrial facilities are among the asset classes most likely to take a hit. “That type of decision-making does slow down during times of uncertainty,” said Chad Piche, research manager of Canada Industrial at JLL. He presented statistics related to this sector as well as for retail and office space. For industrial, the hardest hit areas will vary significantly by location. Looking at major markets, Southwestern Ontario will be most impacted due to its integrated supply chain and automotive sector.
However, like many other industry members, he envisions silver linings ahead, such as breaking barriers to interprovincial trade and developing east-west and west-east trade in Canada and boosting trade in the EU and Asia.
“Specific to the industrial market that could mean increased traffic in the ports of Vancouver and Montreal and Prince Rupert and Halifax,” he suggested. “There are definitely significant supply chain changes that could happen from this; there could be new forms of industrial demand.”
On the retail front, Canadian availability rates remain among the lowest in North America, while REITS remain confident about their portfolios. Similar to the pandemic, this sentiment is especially related to grocery-anchored stores. However, if the trade war endures, and jobs decline, retail demand could slow because of weaker consumer confidence, which, in February, marked its most significant decline since November 2023, according to the Conference Board of Canada.
Office space remains more cushioned, but a recession could lower demand through employment loss and cost-saving strategies, stated Piche. At the same time, office occupiers are showing more confidence in hybrid and other back-to-office work models after years of remote work. This is viewed as a potential safeguard for recession effects. Yet with fewer new offices under construction, higher tariff-related construction costs could further this trend.
