Industrial real estate was the market’s star pupil when e-commerce and reshoring turned logistics space into the hottest corner of property.
Leasing is still happening, but cycles are longer, concessions are creeping back in a few submarkets, and the balance of power between landlords and tenants looks more even than it did during the post pandemic scramble.
The core of the slowdown is not a collapse in demand so much as a comedown from peak growth. Companies spent the last four years securing extra space to smooth supply chains.
As those networks bed in, many tenants are fine tuning footprints rather than racing to add square footage. Some are consolidating into fewer, better located facilities and others are subletting portions they no longer need.
Against that, a heavy delivery slate from projects started in the boom is landing across North American markets. Even in historically tight Canadian hubs, new bays are hitting the market, nudging vacancy off the floor and taking some heat out of rent negotiations.
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Debt that was cheap in 2021 now resets at meaningfully higher coupons, which eats into cash flow and narrows the spread between cap rates and bond yields.
It pressures net asset values on the appraisal side and makes external growth less accretive, since acquisitions or developments must clear a taller cost of capital.
The groups with low leverage, laddered maturities, and ample liquidity still have options. Those reliant on frequent refinancing or asset sales face a trickier calculus.
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Landlords that once pushed double digit rent bumps on renewals are normalizing to midlevel increases in many submarkets as tenants push back and brokers have more options to show.
Development programs, while still valuable, must prove they can deliver spreads that justify risk in a slower leasing environment and the bar has risen for every dollar of growth capital.
Toronto and Vancouver remain among the deepest logistics ecosystems on the continent, but the post pandemic pipeline is finally arriving.
Montreal and secondary nodes are more elastic, which can magnify the impact when even a modest amount of new supply arrives.
Cross-border currency moves also matter for Canadian names with European exposure, where a softer euro or higher local rates can dilute translated earnings and raise refinancing costs.
Dream Industrial’s portfolio spans Canada and Europe, a footprint that was a net benefit when rents surged and debt was inexpensive. In a slower, rate sensitive phase, that mix carries more moving parts.
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The trust’s development and joint-venture commitments, which can be powerful value creators in good times, also tie up capital when credit is tight and leasing takes longer.
This dynamic can strain distribution coverage if operating growth cools faster than expected or if refinancing clears above internal budgets.
We also see relative disadvantages versus larger global logistics peers that can lean on scale, lower funding costs, and a deeper tenant roster to defend margins while they wait for the next upcycle.
Freight lanes are still shifting closer to end customers, retailers continue to blend online and store fulfillment, and manufacturers want resilient supply chains. It does argue for better entry points and higher standards.
