A Continued Upward Trend in Industrial Vacancy in Q2 2025
In its May 2025 Labour Force Survey, Statistics Canada reported that Canadian employment levels remained essentially flat for a second consecutive month. However, the unemployment rate rose 10 basis points (bps) from April to reach 7.0%. Employment in manufacturing fell for the fourth straight quarter and this sector has now shed 30,000 jobs in comparison to employment levels from one year ago. While employment in transportation and warehousing has witnessed gains and losses on a month-to-month basis so far in 2025, overall, there has been a contraction of close to 14,000 jobs in comparison to May 2024.
While the overall Canadian industrial vacancy rate did bump up from last quarter to reach 5.5%, this vacancy rate is indictive of more balanced market conditions. There were varied results for the major markets this quarter, with some witnessing small increases in vacancy, others flat, with a few markets posting declines in comparison to last quarter. Although the overall Canadian vacancy trajectory has been on a steady incline since mid-2023, the pace of the quarter-over-quarter (QOQ) increases has slowed in recent quarters. Vacancy is forecasted to continue to climb, although likely in small increments QOQ, through the remainder of the year and into early 2026 before stabilizing.
Absorption remained firmly entrenched in negative territory this quarter totaling 1.9 million square feet (msf). While Vancouver and Toronto witnessed minimal absorption this quarter, there were a few outliers. From a positive absorption perspective Calgary had a notable rebound from last quarter to reach just over 1.0 msf. This was significantly boosted by the delivery of 1.0 msf of new supply this quarter that was fully preleased upon completion. On the opposite end of the spectrum was Montreal with negative 3.1 msf of absorption this quarter. This market continues to struggle with the continued arrival of large blocks of space on the market (i.e. over 50k square feet (sf), sluggish demand for large bay spaces, and little recent new construction deliveries are all factors behind the continued negative absorption this market has been posting.
