Latest GTA Industrial Real Estate Report - Q1 2025
- Joe Rosati
- 2 days ago
- 5 min read
OVERVIEW
Though there are those – whether brokers, landlords, or occupiers - who are speaking of this moment in time within the GTA industrial real estate market in bearish tones, making statements about how slow things are right now and how much weaker the market has gotten since its 2022 heyday, there is another argument to be made which is not as simplistic or perhaps as negative. That argument is that what the GTA industrial property market really finds itself rooted in at the moment is a period of stasis, and that the market of 2025 really hasn’t shown its true colours yet due to factors which have somewhat frozen it in time.
It’s clear now, after some skepticism in these pages within past reports, that the major driving factor for this period of inactivity and uncertainty is the trade war instigated by our neighbours to the South which has had a material impact on the market. But it can’t be said necessarily that things are bad, and certainly things are not ‘crashing’ by any means, but rather that we find ourselves in a period of uncertainty and pause when most major market players – landlords, renters, buyers, sellers – are not comfortable moving forward with major decisions unless they really have to, and would prefer to let things play out until there is more economic clarity on the horizon. The numbers described in the sections below help bear this out.
LEASING

The overall vacancy rate for industrial real estate in the whole GTA increased rather sharply from 2.7% in Q4 2024 to 3.7% in this latest quarter. Though that is no doubt a reflection of softening leasing activity, it also reflects the fact that some landlords approaching end of year would prefer to wait until after the new year to list new space for lease which has a slight upside effect on inventory on the market in Q1. That said, there is no denying that leasing activity has weakened more sharply after a more steady decline throughout 2024, and much of the feedback among Lennard’s industrial clients reflects the uncertainty of the moment that is affecting decisions around relocations or expansions. Even those businesses that are not directly impacted by US tariffs are concerned about the broader economic impacts of such tariffs and the potential softening that may bring to their business. This sharp vacancy rate increase was seen within each submarket of the GTA without exception, with GTA West and GTA East seeing the highest vacancy rates last quarter of 4.5% and 5.9% respectively.
As mentioned in our last report, one major factor for the steadily increasing vacancy rate which cannot be overlooked is the timing of large industrial new developments (100k+ SF) reaching completion in a very challenging environment for such large bay properties. In fact, with much of the new development activity for such large-scale projects taking place in GTA West and GTA East (predominantly Halton and Durham Regions), it’s no surprise that those submarkets have higher vacancy rates than other submarkets. That being said, much of the new construction offerings coming online were initiated a few years ago during more favourable speculative conditions, and as the new-development pipeline has slowed significantly since then these project completions are expected to slow considerably throughout 2025.
Not surprisingly, as a result of slowing activity and rising inventory of space for lease, net asking rates for industrial properties continued to decline gradually. The overall GTA average asking net rate declined from $17.33 in Q4 to $$17.08 this latest quarter, with all sub-markets seeing similar declines. That said, and has been pointed out in these pages before, one can put those numbers in perspective by noting that even during the very strong market of 2022, the Q4 average asking net rate in that year GTA-wide was only $15.66. As in many markets, there is often less friction for prices to rise than there is for them to fall. Leasing rates remain historically high by any standard, but time will tell how long those rates continue to erode slowly before hitting an inflection point back to the upside.
SALES
One interesting tidbit that is apparent in the numbers is that although the vacancy rate has continued to climb, the availability rate has actually decreased quarter over quarter – from 5.7% in Q4 to 5.4% in Q1. Unlike the vacancy rate, the availability rate includes all sub-leases, spaces under construction, spaces that are still occupied but available, and spaces that are for sale. This last piece is what we’re latching onto as a theory into why the availability rate may have come down.
One aspect about industrial real estate that is very different than other asset classes such as office, is that even in a weak economic environment, which we’re in at the moment, there is very little distress among the property owners. Most industrial property owners acquired their properties years ago at much lower valuations and many of these owners carry minimal debt on those properties. As a result, even in an era of higher vacancy, elevated interest rates (although coming down), and economic stagnation, most owners don’t have to sell and are happy to wait for what are perceived to be more favourable market conditions before placing their property on the market. As a result, we continue to observe a somewhat counter-intuitive phenomenon where during times of stagnation in the industrial market, there are actually less properties available for sale. Case in point, in Q1 of 2024 the total available industrial space for sale in the GTA was 5.7 million SF, while one year later in Q1 of 2025 it was 4.6 million SF.
This scenario has had a dampening effect not just on the availability rate in the GTA but on sale pricing as well which remains essentially flat – the average sale price for industrial properties in the GTA was unchanged from $358 in both Q4 and this latest quarter. In addition, total sales volume GTA-wide for industrial property was down from $1.35 billion in Q4 in 2024 to $1.19 billion in Q1 of this year after reaching highs in the $2-3 billion range throughout 2022 and 2023. No doubt the current pessimism and uncertainty among buyers plays a large part in this, but one can’t deny that less available inventory for sale is also a factor.
THE ELEPHANT HAS SPOKEN
In our last report, we referred to potential US tariffs as the “elephant in the room” for the GTA industrial real estate market. It’s safe to say now that the elephant has taken a seat at the table, put its feet up, and has decided to hang out for a little while. Though not reaching the levels of hysteria and news coverage as a few weeks ago, the tariff situation remains in flux and continues to be a dark cloud hanging over many facets of the Canadian economy. The optimistic point of view is that the American president will continue to soften his stance and negotiate further exemptions, as well as that the Canadian election and the closure that brings in terms of Canada’s path forward will be mitigating factors against economic stagnation. As these issues progress through 2025 and as certainty slowly returns to the market, confidence among market players will inevitably improve causing them to come off the sidelines, and this should provide a positive boost to market conditions.