The space remains an attractive one for investors, with further growth expected in the coming year
This article is part of CMP’s Commercial sector focus for January, spotlighting the commercial mortgage market and some of the key trends and issues facing the space in 2026.
Canada’s industrial sector emerged as a bright spot in the commercial real estate market even amid wider turbulence in recent years, remaining an appealing prospect for investors as their appetite waned elsewhere.
And while the space isn’t exactly set for a growth surge in 2026, most market observers expect it to keep its place as one of the most prominent asset classes in the commercial realm as others stage a slow recovery.
Industrial, according to PwC, is still one of Canada’s “resilient and emerging asset classes,” with a tilt to small bay assets – referring to smaller, multi-tenant commercial spaces within larger buildings – likely in the year ahead.
And in its 2026 Global Investor Outlook, Colliers noted that Canada remains one of the most attractive commercial real estate markets globally, thanks in no small part to the fact that industrial and logistics assets continue to perform well even despite moderating demand.
It earmarked urban infill and small- to mid-bay facilities as key priorities for investors rounding out 2025 and looking forward to this year.
Competing factors to determine extent of 2026 industrial growth
The sector hasn’t been immune to wider geopolitical headwinds like those that have emerged again in the past week, with fresh questions arising about what the future holds for Canada’s economy in the face of a bellicose Trump administration in the US.
Construction activity and completions in the industrial space reached close to record highs and then demand fell in 2025 – partly because of political events south of the border, Morguard’s senior director, research Keith Reading (pictured top) told Canadian Mortgage Professional.
“A big driver of that demand moderation was the economic uncertainty and the tariff-driven uncertainty that we’ve seen over the last year or so,” he said. “But I think for industrial, things will settle down pretty quickly.
“I don’t think we’re going to see the record rent growth and very tight conditions over at least much of the next year. I think now that we know at least in the short term that the tariffs are not going to have as big of an impact on our economy as we thought, and the other piece is that we’ve really seen a drop in new supply deliveries, so new construction has slowed substantially.”
That trend will help the market tighten because available space will dry up, eventually putting upward pressure on prices. “Even with moderately healthy industrial demand we could see conditions tighten up again,” Reading said.
“So as an example, in Toronto we went from less than 1% vacancy. Now we’re up around 4% or 5% vacancy. But it’s still pretty tight.”
Rate cuts could prove a key factor in industrial sector’s prospects
The Bank of Canada is expected to hold steady on interest rates in its opening decision of the year and possibly stay on a prolonged pause as it weighs up how the economy and inflation are faring.
But if they arrive later in the year, new cuts could boost investor appetite further, according to Avison Young, not least in the industrial space.
The commercial real estate giant reported that large industrial blocks in Vancouver were already seeing significant interest towards the end of 2025 – and in Toronto, Avison Young professionals viewed robust industrial demand as part of the reason for cautious optimism heading into the new year.
In Calgary, meanwhile, professionals saw industrial and multifamily health as the main factors behind a healthy commercial outlook for 2026.
But while the Canadian economy is expected to carve out decent growth this year, nothing can be taken for granted – especially with an unpredictable and often erratic administration in place south of the border, even if the impact of tariffs to date hasn’t been overwhelming.
That means “positive, but certainly not robust” prospects for the economy and industrial sector, Reading said. “But if we do see some sort of agreement on trade and trade stability, I think businesses will know what the environment’s going to be like,” he added, “and they can dust off those expansion plans, and we could see economic activity and growth increase toward the end of 2026.”
This article is part of CMP’s Commercial sector focus for January, spotlighting the commercial mortgage market and the key trends and issues facing the space in 2026. Find all the rest of our special coverage here.
