Ottawa’s industrial market is “showing signs of stabilization” after several years of rapid growth, a new report says, with average asking rents falling as demand for space levels off. The city’s industrial vacancy rate was 2.5 per cent in the first quarter of 2026, Colliers said in its latest market report, down from 2.7 per […]
Already a Subscriber? Log in
Get Instant Access to This Article
Become an Ottawa Business Journal Insider and get immediate access to all of our Insider-only content and much more.
Ottawa’s industrial market is “showing signs of stabilization” after several years of rapid growth, a new report says, with average asking rents falling as demand for space levels off.
The city’s industrial vacancy rate was 2.5 per cent in the first quarter of 2026, Colliers said in its latest market report, down from 2.7 per cent in the fourth quarter of 2025. The availability rate – which includes space that is empty plus space that is occupied but on the market for future lease or sublease – dropped a tenth of a percentage point to 3.4 per cent.
The local market experienced net absorption of about 66,000 square feet in the first three months of 2026, Colliers said.
But the firm also said leasing and touring activity was “slightly lower than typical levels” seen over the past few years, when vacancy rates typically hovered between one and two per cent, with tenants becoming “more cautious” about renting space.
“I don’t think we’re going to see any major, massive swings upwards or downwards,” Warren Wilkinson, senior managing director at Colliers’ Ottawa office, said Monday. “The unbridled growth that we experienced over the past couple of years I think has certainly subsided.”
The average asking rental rate in Ottawa was $16.75 per square foot in the first quarter, a two per cent decrease from the previous quarter and a one per cent drop from a year ago.
Colliers said small-bay buildings of under 20,000 square feet in the east, south and central-west areas of the city continued to draw the most interest. The company said there were several large contract renewals in the first quarter as “occupiers chose to remain in place due to limited relocation options and rising tenant improvement costs.”
With little inventory to choose from, some tenants are broadening their search for small-bay space to tertiary markets such as Hawkesbury and the Highway 401 corridor, Colliers added.
Wilkinson said he doesn’t expect any relief in sight for tenants seeking small-bay space in the tight Ottawa market.
“It doesn’t make economic sense to build it, so the existing product that’s in the market is highly sought after,” he explained.
At the same time, economic factors are weighing on the sector, Wilkinson added. Ongoing uncertainty surrounding the impact of U.S. tariffs and rising energy costs may be causing tenants to rethink their real estate needs, he said, potentially dampening demand for larger properties.
Local companies drove much of the leasing activity at new developments such as Avenue 31’s National Capital Business Park in the city’s south end, Wilkinson said. But that might need to change if larger vacancies such as Rosefellow’s 230,000-square-foot building on Huntmar Drive in Kanata are to be filled, he added.
“A lot of that was Ottawa-based organic absorption due to pent-up demand for new properties,” Wilkinson said. “We may have seen the end of that, or certainly the tapering off of that. We saw very little organic growth from companies (new) to the Ottawa market. We’ll need to see some more of that in order for us to absorb some of those new pockets. That could very well be right around the corner with increased federal government defence spending.”
A limited pool of sale properties has pushed prices of buildings being purchased by owner-occupiers to record highs of more than $350 per square foot for well-located properties in good condition, Wilkinson noted.
Meanwhile, owners of older industrial buildings may be “increasingly motivated to pursue residential redevelopment” of those sites as the city looks to prioritize intensification near major transit corridors, Colliers said in its report.
The company pointed to Regional Group’s proposal to demolish the Ottawa Citizen building on Baxter Road and replace it with a seven-block subdivision with as many as six highrises containing 1,400 new residential units.
