Industrial real estate could bear brunt of tariffs’ impact, local Colliers execs say

March 5, 2025

Warren Wilkinson, senior managing director of Colliers’ Ottawa office, told a crowd of real estate insiders it’s too early to predict how the trade dispute between Canada and the U.S. will play out for the industry.

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Ottawa’s industrial sector will likely feel a bigger impact from a tariff war with the United States than other segments of the city’s commercial real estate market, a local industry leader said Wednesday. Warren Wilkinson, senior managing director of Colliers’ Ottawa office, told a crowd of real estate insiders it’s too early to predict how the trade dispute between Canada and the U.S. will play out for the industry. But in a morning presentation at the World Exchange Plaza, he said the city’s industrial sector is particularly vulnerable to the economic repercussions of tariffs. “It’s about exports,” Wilkinson told an audience that included brokers and other executives from across the National Capital Region. “Those big exporters occupy a lot of space in the Canadian marketplace, and Ottawa is not immune to that. We could start seeing a slowdown in activity, and we could start seeing a slowdown or even a reduction in overall absorption.” Ottawa’s industrial sector has been a standout performer since the pandemic, with vacancy rates among the country’s lowest at around two per cent. Rental rates have been steadily rising as e-commerce giants like Amazon have set up major distribution centres in the National Capital Region, prompting a wave of new construction and a huge pipeline that includes nine million square feet of future development. But since some goods stored in local industrial spaces are bound for the U.S., Colliers executive vice-president Oliver Tighe said tenants in those buildings may be “more prone” to the impact of tariffs than occupiers in the office and retail sectors. “In Ottawa, certainly there are going to be individual industrial users who are more heavily impacted by these tariffs than others, and it could result in them having to vacate existing space,” Tighe said in an interview with OBJ after Wednesday’s event. “So I think the risk is certainly in the industrial market more than anything.” Speaking to OBJ after the presentation, Wilkinson said it could take 12 to 18 months for the effects of tariffs to “trickle down” to the commercial real estate market. “At this point, we don't really know how things are going to work out,” he explained. “There’s fixed terms in place, there’s fixed leases in place. People are buying buildings based on those leases. We have to keep our eyes wide open and we have to pay attention to what’s happening.” The office sector, meanwhile, remains in flux as companies try to figure out how much space they’ll need in a post-pandemic world. Vacancy rates have “pretty much stabilized” at around 11.5 per cent in Ottawa, Wilkinson told the audience, but the gulf between the haves and have-nots of the office world continues to widen as tenants leave lower-quality buildings in favour of new or remodelled properties with perks like gyms and user-friendly common areas. “Well-positioned and located spaces with good amenities are performing well, both downtown and in the suburbs,” he said. “Anyone that hasn’t put any time, energy and effort into their buildings is continuing to struggle.”

'Ton of opportunity'

With economists such as RBC’s Frances Donald predicting Canada’s unemployment rate could rise to more than eight per cent if tariffs are in place for more than a year, Wilkinson and Tighe said employers may start to feel more emboldened about imposing stricter return-to-office policies that would benefit landlords. “If the demand for jobs is outpacing the supply, then employers can be more particular about what they want from their employees,” Tighe noted. “Employees aren’t going to have that much choice, so if the job requires you to be in the office, you’re going to go to the office. It should result in more positive uptake in office occupancy in Ottawa.” Tighe said that despite the cloud of uncertainty hovering over the Canadian economy, he believes there is “a ton of opportunity” for buyers looking to enter the Ottawa office market or strengthen their position in the region – particularly as institutional owners reassess their portfolios. “I think we’re going to see nimble local buyers looking at, not necessarily distressed assets, but assets that existing owners don’t want to deal with anymore,” he explained. “They’re going to buy them, they’re going to find opportunities to either reposition or lease up or rebrand. I’m optimistic in that way.” Wilkinson agreed. He noted that a couple of major office complexes – including Export Development Canada’s headquarters at 150 Slater St. – are in the process of being sold, at least one to a local investor. “It’s a market of uncertainty,” he said. “Uncertainty breeds a little bit of chaos. Chaos breeds opportunity.” Meanwhile, retail remains the “most resilient” commercial real estate sector in the post-COVID era, Tighe said, thanks to persistent demand for space in grocery-anchored shopping plazas. “Even though the pandemic is over, large-scale investment companies still want what they call pandemic-resistant assets” such as supermarkets and pharmacies, he said during the presentation.