SW Ontario Industrial Market Report

Demand remains healthy, but is starting to soften. Following a record year of demand in 2022, the metro has begun to see leasing activity moderate over the first three quarters of the year. Net absorption has lagged behind completions as rising interest rates have curbed industrial space demand for Class B and C product. As a result, the region’s vacancy rate has increased by 110 basis points year-over-year as of September. Despite these near-term challenges, Southwestern Ontario remains well-positioned. The region is experiencing rapid population growth due to historic immigration and its relativity lower cost of living, which will support long-term e-commerce-related space demand. With the average asking rent sitting roughly 33 per cent below that of the GTA, many tenants priced out of Toronto are choosing Southwestern Ontario because of its more affordable nature. Lastly, as manufacturing nearshoring gains momentum, evolving demand drivers are beginning to emerge. These factors will cap upward pressure on the metro’s industrial vacancy rate.