GTA Industrial Real Estate Market Outlook - Q3 2025

Overview

After strong headwinds over the last 18 months, the GTA industrial market feels like it’s finding its rhythm again, if ever so slightly. The fear and trepidation that was sparked by April 2nd's "Liberation Day" and the tariffs which that day set in motion have had a few months to work their way through the markets, but more importantly through market players' psyches. The fear and uncertainty showed signs of waning in Q3 and especially so over just the last few weeks. The leasing market is where these signs of life are appearing more prominently, as businesses that deferred relocation or expansion decisions have started to reconsider their space requirements.

Though market data tends to have a lagging effect versus the “on the ground” market signals, the data does appear to be starting to reflect the anecdotal sentiment from many brokers that the market is picking up. The overall GTA vacancy rate rose only marginally from last quarter after seeing steeper increases in the preceding quarters, and in a few GTA submarkets, the vacancy rate actually dropped for the first time in roughly two years. More on this in the Leasing section below.

Sales activity also seems to have hit a bit of a turning point, even if occupiers remain more cautious on buying decisions than they are on leasing decisions (naturally), and investors continue to sit on the sidelines. That being said, pricing remains resilient and supply of available properties for sale remains thin, and no doubt those two factors are correlated. As the Bank of Canada continues to cut rates and confidence among businesses continues to recover, we can expect the sales market to show even more signs of strengthening in subsequent quarters.

Despite the positive signs, skepticism remains among a block of business leaders about where things are going. In fact there remains a common sentiment within that crowd that we haven’t quite reached the bottom in both the broader economy or the industrial real estate market. However, those immersed in industrial leasing are starting to bang an optimistic drum and there would be no surprise in this corner if positive news on the tariff front, which may or may not be forthcoming, led to accelerated optimism even more broadly.

Leasing

The overall GTA industrial vacancy rate rose once again in Q3, the 11^th consecutive quarterly increase since starting its upward trajectory in Q4 of 2022. However, the increase in this latest quarter was marginal, increasing only 0.1% from 4.4% to 4.5%, and for all intents and purposes, this represents a flat market from Q2 to Q3 overall. In fact, when specific sub-markets are assessed, it’s interesting to note that vacancy rates in GTA West and GTA East actually dropped for the first time in approximately two years.

For landlords, the story now should be less about concessions and more about striking the right balance: realistic pricing, flexible terms, and an ear to what occupiers actually need. It's important to get ahead of the pricing curve rather than simply reacting to lagging data, and that curve may have just hit an inflection point after pointing downward for a while (though the data on this is yet to fully materialize). As a result, we may start to see landlords hold slightly firmer on rates than a few months ago, at least until the picture becomes more clear.

Average asking net lease rates in the GTA overall fell again to $16.57 PSF, continuing a downward trend and a fifth consecutive quarterly decline, though still elevated relative to pre-COVID rates. That being said, asking rates tend to be very lagging in nature as, unfortunately, listing decisions are often based on lagging data themselves. If we continue to see the vacancy rates flatten and potentially decrease more broadly, one can expect strengthening rates (asking and transacted) will soon follow.

Sales

On the sales side, the overall GTA industrial market showed an uptick of positive data that matches the anecdotal sentiment among brokers. Time will tell whether this is a flash in the pan or the start of a more sustained recovery.

Total transaction volume for Q3 came in at $1.24 billion, an increase from Q2’s $890 million, though still well off the $2–3 billion quarterly averages of 2022 and 2023. After three consecutive quarterly declines in sales volume, it was encouraging to see an increase.

Sales pricing also bounced back, jumping to $357 PSF this latest quarter, up from $339 in Q2. That aligns this latest quarter with Q4 of 2024 and Q1 of 2025 when the average sale price was $358 PSF, indicating that Q2 was either an outlier, or that the market softened for a brief period before rebounding again in Q3.

This speaks to the price resilience that continues to be seen in the GTA industrial market, no doubt supported by tight sale inventory due to the many sellers who choose to defer selling decisions until conditions are perceived to be more favourable. Continued market upside should be seen if the Bank of Canada continues to cut interest rates over the next 12 months, as is widely perceived to be the case, even if not as aggressively as previously thought.

Looking Ahead

If Q2 was about recalibration, Q3 was about signs of hope. Market players seem to have had enough time to wade through the tariff noise and economic storm clouds, and many are realizing that their worst fears never quite materialized and that they must continue to move forward with real estate decisions. This is all occurring within an environment where the interest rates continue to decline and businesses adapt as necessary to changes within their industry. 

This is not to say that the worst is behind us (it may not be), or that any potential recovery may be swift (it may not be). But with each passing quarter where the bottom of the market does not fall out from under it, and this most recent quarter which showed the clearest signs of flattening if not improving leasing/sales conditions, fingers are crossed that it’s brighter skies ahead.