Small-Bay Is Where the Vacancy Went
Industrial vacancy hit a decade high. The average hides where it sits.
Metro Vancouver industrial vacancy hit a decade high at the end of 2025. Most of it sat in one segment, and it isn’t the one I’d worry about owning.
The headline number: Newmark put Greater Vancouver industrial vacancy at 3.3% in Q4 2025, the highest since mid-2015. By most markets’ standards that’s still tight. By Vancouver’s, it was a real move.
The detail matters more than the headline. Newmark put much of the vacancy in small and mid-bay space, after a wave of deliveries in 2024 and 2025. Large-format space stayed in demand.
It just takes a small slice of the market to move the average. Say a fifth of the inventory sits at 10% vacancy and the rest at ~1.6%. The market average comes out at ~3.3%. That reads as a soft market, while most of the buildings are as full as they were.
The split is illustrative arithmetic.
A fifth of the inventory can carry most of the vacancy. How a 3.3% average can form: bar width is share of inventory, height is vacancy. 20% of inventory at 10% plus 80% at 1.6% averages 3.3%, with ~61% of the vacant space in the 20% slice.
Illustrative arithmetic, not reported data. Market average: Newmark, Greater Vancouver industrial, Q4 2025, via Connect CRE.
The headline may have peaked since. Altus had Vancouver availability at ~5.9% by Q3 2026, down slightly year over year. The new small-bay supply hasn’t cleared, though. One small-bay building completed in Altus’s Q3 count was still fully available.
The question worth asking is whether older small-bay, with reasonable rents and a loading door, has gone through the same reset as the new product.
In the secondary markets I follow, the supply picture looks different again. Where little or no new small-bay was built, there’s no new supply to absorb.
I think this is the more useful way to read the headline:
- ask which segment the vacancy is in, and whether it’s new supply or lost demand
- check what’s under construction locally, not regionally
- compare in-place rents to what new product needs to charge to pencil
None of that makes older small-bay riskless. New supply sets a ceiling on rent growth nearby, and tenants with options negotiate harder. But a decade-high average is a reason to look at segments more closely, not to back away from the whole asset class.
The open question is how long the new small-bay inventory takes to lease up, and whether older buildings nearby have to meet its pricing in the meantime.