Commercial Real Estate Market of the Month: Kelowna, BC

Kelowna Industrial Market: Tight Central Supply, Emerging Growth Nodes, and Steady Demand

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Kelowna Industrial Market Overview

Kelowna remains the Central Okanagan’s primary industrial market, supported by Highway 97, Kelowna International Airport, and its role as the region’s principal distribution and service centre. Industrial activity is concentrated across established central areas such as Dilworth-Springfield and Kelowna North, while newer development is increasingly shifting toward Reid’s Corner/University District, Winfield, and other growth areas.

Demand remains steady from distributors, service companies, manufacturers, and regional logistics users that require efficient access throughout the Okanagan. Well-located industrial properties with strong loading capabilities and transportation access continue to generate the greatest interest.

At mid-year 2025, Kelowna’s overall industrial vacancy rate stood at 3.8%, although conditions varied considerably by submarket:

• Dilworth-Springfield: 0.9%
• Kelowna North: 1.5%
• Rutland: 2.3%
• Reid’s Corner/University District: 7.5%
• West Kelowna: approximately 10%

These differences highlight the importance of location within the Kelowna industrial market. Established central areas remain particularly constrained, while newer and more peripheral submarkets provide a greater share of available inventory.

Why Kelowna Is a Key Commercial Real Estate Hub

Kelowna’s position within the Central Okanagan makes it an important commercial real estate and industrial hub for businesses serving the region. Highway 97 provides the primary transportation corridor through the city, while Kelowna International Airport further supports regional connectivity.

Central industrial areas such as Dilworth-Springfield benefit from convenient Highway 97 access and connectivity throughout Kelowna. Kelowna North also remains an important established industrial district, offering proximity to customers, suppliers, and the broader urban population.

As industrial land becomes increasingly difficult to secure in central locations, development is shifting toward areas such as Reid’s Corner/University District and Winfield. These emerging nodes are accommodating more distribution, service, light manufacturing, and logistics-oriented occupiers.

West Kelowna continues to operate differently from the rest of the market. Vacancy is significantly higher at approximately 10%, with slower absorption despite ongoing industrial development. Tenant hesitation around commuting across the William R. Bennett Bridge during peak traffic periods remains a factor influencing demand.

Development Activity and Growth Areas

Approximately 176,000 square feet of industrial space was under construction across Greater Kelowna at mid-year 2025. Key projects included:

• Kyle Road Business Park, West Kelowna: approximately 100,000 SF
• 1200 Mayfair Road: approximately 40,000 SF
• Carrington Business Park Phase 3: 36,224 SF
• Winfield: an additional 52,000 SF approved

Despite this activity, Kelowna’s broader industrial development pipeline has slowed, with some proposed developments paused or cancelled. This is limiting the amount of new inventory expected to reach the market and could continue to constrain options for occupiers seeking specific building configurations.

Available inventory also tends to favour smaller units. Standalone buildings and functional mid-sized facilities with strong loading capabilities remain comparatively difficult to secure, particularly for businesses requiring approximately 10,000 to 20,000 square feet.

Market Performance: Rental Rates, Supply, and Demand

The Kelowna industrial market has remained relatively stable over the course of 2026, although rental rates and availability vary significantly depending on location.

High-demand central areas such as Dilworth-Springfield and Kelowna North continue to experience lower vacancy and stronger asking rents. Average net rental rates in these areas generally range from $16.00 to $19.00 per square foot, with some properties asking more than $20.00 per square foot.

Reid’s Corner/University District, Winfield, and West Kelowna have greater available supply and less pricing pressure. Average net rental rates in these areas generally range from $14.00 to $17.00 per square foot.

Additional rents across the Kelowna industrial market typically range from approximately $4.00 to $6.00 per square foot.

West Kelowna’s higher vacancy has not yet resulted in a full adjustment in asking rents, with average net rental rates remaining around $17.00 per square foot despite slower absorption.

Key Takeaways for Commercial Real Estate Tenants

Kelowna’s industrial market is becoming more balanced, giving some tenants greater negotiating leverage as leasing activity moderates. However, businesses should consider more than overall vacancy when evaluating their real estate strategy.

Planning ahead remains important. With a slower development pipeline and limited availability of highly functional space, tenants should evaluate relocation and renewal alternatives well before lease expiries.

Central industrial space remains limited. Vacancy in Dilworth-Springfield and Kelowna North remains well below the overall market rate, reducing options for businesses that prioritize central locations.

Mid-sized requirements can be challenging. Tenants seeking approximately 10,000 to 20,000 SF, standalone buildings, larger floorplates, or multiple loading doors may have fewer suitable alternatives.

Location can significantly affect rental rates. Central submarkets generally command higher rents, while Reid’s Corner/University District, Winfield, and West Kelowna provide comparatively more supply.

New development is shifting outward. Businesses requiring modern industrial space may increasingly need to consider emerging growth areas rather than established central locations.

Kelowna Commercial Real Estate Outlook

Kelowna’s industrial market is transitioning from the exceptionally tight conditions of recent years toward a more balanced environment. However, the headline vacancy rate does not tell the full story. Established central areas remain significantly tighter, while much of the available supply and new development is concentrated in peripheral growth nodes.

A limited development pipeline, steady occupier demand, and the scarcity of quality standalone and mid-sized industrial facilities should continue to support well-positioned properties. At the same time, greater availability in Reid’s Corner/University District, Winfield, and West Kelowna could provide businesses with additional options where location flexibility exists.

For tenants, investors, and developers evaluating commercial real estate in Kelowna and the Central Okanagan, transportation access, building functionality, and submarket selection will remain key considerations as the market continues to evolve.

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