Canada’s industrial market is beginning to tighten after several years of rising vacancy, with CoStar forecasting positive rent growth could return by late 2027 as demand improves and new supply slows.

National vacancy has already eased to 4.5% after reaching 4.75% in 2025, when a wave of new development collided with weaker tenant demand. CoStar expects vacancy to fall below 4% by the end of 2027 and reach 3.25% by the end of 2028, slightly below its previous 3.5% forecast.

The recovery is increasingly showing up in absorption. After turning negative in the first half of 2025, net absorption has averaged about 5M SF per quarter since the beginning of this year.

CoStar expects that pace to accelerate to 7.5M SF per quarter through the end of 2027, supported by continued consumer spending and stronger export activity. At the same time, the development pipeline is shrinking, giving the market more time to work through existing space.

“Given the improvement in the balance between supply and demand, we expect rent growth to remain roughly flat for most of 2027 before beginning to trend upward late in the year and continuing into 2028,” said Mario Lefebvre, CoStar’s chief economist for Canada.

There are already signs of larger vacancies being absorbed. As Connect reported today, Pure Industrial filled the entire 411K-SF former Hudson’s Bay distribution centre in Richmond, B.C., a block that had contributed to higher Metro Vancouver availability.

CoStar expects absorption to normalize to about 5M SF per quarter beginning in 2028, suggesting the rent recovery is being driven less by another demand surge than by a healthier balance between leasing and new construction.

Trade and tariff uncertainty, elevated operating costs and slower population growth remain risks to that outlook.

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