Warehouse Leasing Surges 49.2% as Tariffs Loom Over Canadian CRE

Canadian commercial real estate is facing a pivotal moment. As the September 8 U.S. tariff retaliation date approaches, the market is seeing a striking divergence between manufacturing and logistics activity. While manufacturers have kept leasing steady, transportation and warehousing users have driven a surge in demand.

According to Cushman & Wakefield, leased square footage by transportation and warehousing users rose 49.2% year-over-year. This exceptional growth is happening just as the sector braces for higher costs and shifting trade dynamics. For investors, lenders, and underwriters, the question is how sustainable this momentum will be once tariffs take effect.

This article explores what is driving the surge, how market participants are responding, and what risks and opportunities lie ahead for those underwriting or acquiring industrial assets—especially in Ontario.

The 49.2% year-over-year increase in leased square footage by transportation and warehousing users, as reported by Cushman & Wakefield, marks a significant shift in Canadian industrial real estate. While manufacturing leasing volume held steady relative to the first six months of 2025, logistics users have rapidly expanded their footprint. This divergence points to a logistics sector that is adapting quickly to evolving supply chain needs, even as broader economic pressures mount.

One key factor is the anticipation of new U.S. tariffs, which are set to take effect on September 8. Cushman & Wakefield estimates that current tariff rates (as of May 21, 2026) will increase construction materials costs by 9.2%, with total project costs rising by 0.92% on average. These higher costs are likely to affect both new developments and renovations, making existing warehouse space even more valuable in the near term. For tenants, securing space before further cost escalation may be driving the current leasing rush.

Lenders and underwriters are responding with increased caution. As noted by renx.ca, lenders remain selective and more conservative in underwriting, applying higher minimum hurdles and more conservative assumptions around rent growth and vacancies. This means that even as leasing activity surges, deals are being scrutinized more closely, and risk tolerance is tightening. Underwriting teams are now focused on how vacancy trends and lease-up assumptions will hold up as trade dynamics shift.

At the same time, market fundamentals are beginning to show early signs of change. According to newswire.ca, rental rates have begun to ease while vacancy rates edge higher. This could indicate that the current leasing surge is at risk of slowing if new supply outpaces demand or if tariffs dampen economic activity. For those modeling debt service or projecting stabilized income, the challenge is to capture a realistic scenario range that accounts for both the recent momentum and the potential for a reversal.

Implied cap rates for industrial REITs have held steady around 5%, according to Cushman & Wakefield, even as those for apartment, office, and mall REITs have fallen below late-February 2026 levels. This stability suggests that investors still see industrial assets as relatively resilient, but it also means that any shift in leasing demand or project costs could quickly impact valuations and underwriting assumptions.

For Ontario industrial, the stakes are especially high. The province remains a key logistics hub, and the speed of warehouse demand growth is changing the risk profile for both acquisition and development. Investors and underwriters need to ensure their proformas are capturing a wide enough scenario range to reflect both continued momentum and the possibility of a market adjustment as tariffs take effect.