Industrial landlords in Ottawa remain in a strong position, but businesses seeking space may find relief in 2025 as new inventory enters the market, says a recently released Avison Young report.

Most of the upcoming development will be concentrated in the western and southern areas, including Barrhaven, Kanata, and Carp Road. As these projects come online, prospective tenants will have more leasing options, potentially easing the supply constraints in the small-bay industrial market.

The demand for small-bay industrial space in Ottawa remains exceptionally high, with limited availability keeping it a competitive segment. Sublease opportunities are rare and tend to be quickly absorbed.

Despite strong lease rates, rental prices appear to be stabilizing following a period of sharp increases. Non-traditional users, such as fitness centres, cultural groups, and religious organizations, are also entering the small-bay market, further intensifying competition.

While tenants have largely managed rental-rate increases, relief may be on the horizon. With new supply entering the market, landlords may face less leverage in future lease negotiations.

However, industrial land and investment properties remain in short supply, keeping prices elevated. Owner-user buildings are particularly scarce, and investors continue to face challenges securing assets despite having significant capital.

Some tenants and buyers are now looking beyond Ottawa’s core industrial areas to nearby communities such as Almonte, Ont., Carleton Place, Ont.; Limoges, Ont., and Casselman, Ont., for more affordable options.

Market indicators show a 0.9% increase in vacancy rates for multi-tenant industrial properties since the third quarter of 2024, with Ottawa South experiencing a jump to 2.4% from 1% to 2.4%. Available industrial space for lease and sale has increased steadily quarter-over-quarter, while sublease availability has decreased by 100,000 sf.

The 500,000 sf of new supply delivered in 2024, including a 450,000-sf Amazon Distribution Centre, contributed to the vacancy rate increase from 2.0% to 2.4%. Despite these shifts, net asking rents have continued to climb slightly, reflecting ongoing increases in additional rental costs.

Among the top industrial properties made available for lease were Manulife’s 101-201 Innes Park Way (113,000 sf); KRP Properties’ 340 Legget Drive (51,960 sf,), and Colonnade BridgePort’s 2070-2092 Walkley Road (48,349 sf.)

The largest industrial sales transactions included KingSett Capital’s acquisition of 2215 Gladwin Crescent for $36.8 million; 373 Coventry Road Limited’s purchase of 373 Coventry Road for $7.3 million, and Mac St. Inc.’s acquisition of 2636-2638 & 2678 Mac Street for $5.2 million.