Stable Market Conditions to Begin 2026
In its February 2026 Labour Force Survey, Statistics Canada reported that Canadian employment levels dropped for the second consecutive month, with a decline of 84,000 jobs, for a 2026 year-to-date total job loss of 109,000. The unemployment rate climbed by 20 basis points (bps) from last month to 6.7%, due to a combination of falling employment levels and more people searching for work. Employment in the transportation and warehousing sector witnessed some growth in comparison to last month and is up by 2.7% from one-year-ago. Employment in manufacturing; however, did contract for the second consecutive month and is down by 2.8% from the employment levels in February 2025.
After 14 consecutive quarters of increases, the overall industrial vacancy rate stabilized in Q1 2026 at 5.5%, unchanged from last quarter. This was similar to what was witnessed with most of the major markets this quarter, where vacancy rates had a minimal change from the last quarter of 2025, shifting up or down by 10-20 bps.
Absorption levels in Q1 2026 were lower in comparison to the strong activity that occurred in the second half of 2025 but did remain positive at close to 496k square feet (sf). As has been the case for multiple quarters there continues to be mixed results for absorption levels across the major markets. While Vancouver and Toronto combined for over 1.4 million square feet (msf) of positive absorption in Q1 2026, this was counteracted by continued softening in Montreal with close to 780k sf of negative absorption. The occupation of new supply delivered in Vancouver and Toronto did not have an overly strong influence on absorption levels as the inventory delivered in those two markets
was approximately 46.4% preleased.
The national average net asking rent finished Q1 2026 at $14.98 per square foot. While rates have been decreasing every quarter since Q3 2023, the pace of quarterly declines continues to slow. In 2025 the average was 4.5%, down from 6.2% in 2024. Smaller-format spaces under 25k sf remain sought-after and have continued to command higher rents, while pricing in larger blocks over 75k sf remained more competitive.
