Ottawa is building industrial. None of it is for you.

Two readings of the same number

Colliers put Ottawa's industrial vacancy at 2.5% in the first quarter, down from 2.7% at the end of 2025. Availability, which counts empty space plus space that is occupied but on the market, sat at 3.4%.

From a landlord's chair that is a very good number. From a tenant's chair it is the reason you have spent four months looking for a bay.

Both readings are correct, and the gap between them is almost entirely about unit size. I want to walk through why, because the commercial story in Ottawa this year has been office, and I have written about office more than anything else. Industrial is the segment where the numbers actually bite, and almost nobody covers it.

Ottawa is the exception on the construction chart

CBRE's Q2 numbers landed July 6 and buried a line that should be the whole story here. Nationally, industrial construction is conservative. Aside from Ottawa, every tracked Canadian market is building at less than 3.0% of its existing inventory. Ottawa is building at more than that. Proportionally, we are the busiest industrial construction market in the country.

Then the next sentence. Ottawa's pipeline is 95.5% pre-leased.

So yes, cranes. No, relief. Ninety-five and a half per cent of what is going up already has a name on it before the slab cures. CBRE says it plainly, that the Ottawa pipeline "will have a limited impact on market availability."

You can watch it happen building by building. Avenue 31's National Capital Business Park, on 100 acres at Hunt Club and the 417, has three buildings finished at 441,000 square feet with over 80% leased, and a fourth of more than 200,000 square feet already better than 60% pre-leased before it opens. Desjardins bought 80% of two of those buildings for $77 million. That is institutional capital taking down finished, leased Ottawa industrial. It is not capital that produces a vacancy for a local contractor to move into.

One methodology note so the numbers make sense together. CBRE tracks Ottawa availability materially higher than Colliers does, on a different definition, and had it falling another 30 basis points in Q2. Both firms have the market tightening. They disagree on the level, not the direction.

Rents went the other way here

The national industrial rent picture in 2026 is soft. CBRE has the national average net asking rate down 3.9% year over year to $14.78 a square foot, dragged down by Toronto and Montreal, both of which have now posted ten or more consecutive quarters of rent declines.

Ottawa went the other way. We led the country in quarterly rent growth in Q2 at plus 2.2%. Colliers had the Ottawa average asking rate at $16.75 in Q1, off two per cent from the prior quarter and one per cent from a year earlier, so it is not a straight climb. But sitting above the national average while the national average falls is a real signal, and it is the same one the vacancy rate is sending.

The product nobody will build

Here is the part that matters if you own a business rather than a portfolio.

Colliers says the interest is concentrated in small bay, buildings under 20,000 square feet, in the east, south and central-west. That is the electrician, the cabinet shop, the specialty food producer, the guy who needs 4,000 square feet with a grade door and three-phase power. Deepest pool of demand in the market, shallowest pool of supply.

Warren Wilkinson at Colliers Ottawa said the quiet part in April: "It doesn't make economic sense to build it, so the existing product that's in the market is highly sought after." He is right, and the arithmetic is not subtle. Small bay costs more per square foot to build than a big box because you are paying for more walls, more doors, more services and more parking per unit of area. Small bay rents do not run far enough above big box rents to cover that spread. So developers build the 200,000 foot box for the covenant tenant, and the guy who needs 4,000 feet gets nothing.

The consequences show up two ways. Colliers reported a run of large renewals in Q1 where occupiers simply stayed put, not because they liked the space but because relocation options were limited and improvement costs had climbed. And some tenants have given up on the city and started looking at Hawkesbury and the 401 corridor. When an Ottawa business relocates to Hawkesbury over a lease, that is a supply failure, not a preference.

The existing stock is worth more as housing

The last squeeze is the one that makes this structural rather than cyclical.

Ottawa's older industrial buildings tend to sit on generous sites near transit corridors, which is exactly what the city has spent a decade zoning for intensification. Colliers flagged that owners of that stock are increasingly motivated to pursue residential redevelopment. The clearest example is the Ottawa Citizen building on Baxter Road, where Regional Group has proposed demolition and a seven-block subdivision with as many as six highrises and 1,400 units.

I have no argument with that project. Ottawa needs the housing, and I have made the case for the conversion math downtown. But every site that converts takes small bay industrial out of the inventory permanently. The land does not get rezoned back.

What I tell people who need space

If you lease small bay and your term is up inside two years, start now. Not six months out, now. The renewal you negotiate today with your existing landlord is almost certainly cheaper than the alternative, and your leverage is knowing the market rather than threatening to leave. This is the mirror image of the office side, where tenants hold every card.

If you are buying, understand who you are bidding against. Colliers had owner-occupier pricing on well-located Ottawa buildings in good condition at more than $350 a square foot, against a national average asking price of $316.62. Owner-users are winning those buildings because they underwrite differently. They are not solving for a cap rate, they are solving for not having a landlord in a market with no space. Bring an investor's spreadsheet to that fight and you lose most of the time.

And if you already own older industrial on a decent site, get the land valued as land before you sign a tenant for another five years at market rent. The building may be the least valuable thing on the parcel.

The one thing that could change it

Wilkinson raised federal defence spending as the demand event that could finally absorb the larger vacancies, like Rosefellow's 230,000 square feet on Huntmar Drive in Kanata. Worth watching, and it would be good news for the big box owners. But notice what kind of story it is. Defence procurement does not create 4,000 square foot units with grade doors and three-phase power. Even the bull case for Ottawa industrial leaves small bay exactly where it is.

Sitting on a lease that runs out in 2027, or looking at an industrial building and not sure whether you are buying a business asset or a land play? Send me the address and the term and I will tell you which one it actually is. 613-262-6545, or fil@613realtor.ca.