The forthcoming impacts of the Canada-U.S. trade war initiated by President Donald Trump’s tariffs could put a real dent in Canada’s industrial real estate market.
According to a new report by CBRE, recent solid performances in this particular sub-sector of the commercial real estate market are now being overshadowed by the trade war.
“Many [local] markets cited the ongoing tariff and trade uncertainties as a major headwind that tempers the outlook for leasing demand over the next couple of quarters,” reads the report.
Moreover, for the commercial real estate market, “the impact of tariffs will be more directly felt by Canadian industrial markets.”
This is not entirely surprising, as Canadian federal and provincial governments are forecasting that the manufacturing, natural resource-export industries, transportation, logistics, and retail sectors will be the hardest hit.
Such businesses, which account for very significant employment, are some of the largest users of major industrial spaces, including big warehouses and plant facilities.
“If there is tariff intrigue in the office market, there is existential concern in the industrial market,” said CBRE Canada chairman Paul Morassutti in a statement.
“The end of the auto pact and breaking the backbone of the Canadian manufacturing economy is almost too much to contemplate in terms of impacts on market fundamentals. Hopefully this doesn’t come to pass, and if it doesn’t, the industrial market is fundamentally healthy notwithstanding the rise in vacancy.”
However, in the first quarter of 2025, the tariffs do not appear to have had a significant impact.
In Metro Vancouver, the vacancy rate for leased industrial space reached 3.7 per cent in the first quarter. Until last year, this market had the lowest vacancy rate for such spaces, but the rate has increased due to a combination of newly completed supply and the country’s highest average industrial rents. Over the quarter, approximately 1.17 million sq. ft. of industrial space was completed, 4.78 million sq. ft. was under construction, and 1.9 million sq. ft. was leased.
In recent years, Calgary has seen more logistics and distribution demand from tenants shut out of Metro Vancouver’s low availability and high rents. Over the first quarter, Calgary’s vacancy rate reached 5.1 per cent, with 855,000 sq. ft. of unused space going back to the market, 1.9 million sq. ft. under construction, and no completions.
In Edmonton, the vacancy rate reached 2.6 per cent, with 795,000 square feet of space absorbed, 1.12 million square feet of newly completed supply, and over one million square feet currently under construction.
Currently, Greater Toronto has 10.4 million square feet under construction. In the last quarter, 1.55 million square feet was completed, and over two million square feet was absorbed during the same period. The vacancy rate is hovering at 3.4 per cent.
The impact of tariffs on manufacturing and warehousing businesses in Greater Toronto and across Southern Ontario will be important to monitor moving forward.
Out of all the major urban regions, Greater Montreal could see some of the biggest headwinds, with weak economic fundamentals and the trade war impacts combined with Amazon’s forthcoming full exodus from Quebec later in 2025. Amazon announced earlier this year it will close all seven warehouses in the province in response to growing unionization pushes.
Greater Montreal has 2.44 million sq. ft. under construction. This year to date, it has seen 909,000 sq. ft. reach completion and 224,000 sq. ft. absorbed. The vacancy rate is at 4.9 per cent.
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