Q1 2026 GTA Industrial Real Estate Market Report

See my latest commentary below from our Greater Toronto Area industrial real estate market report for the latest quarter, Q1.

Overview

The theme for the GTA industrial market at the start of the 2026 is one of positive signals (on the leasing front) against a backdrop of continued (and emerging) uncertainty. The data clearly shows improvement and activity in Q1 for leasing activity, which is a spillover from the initial signs of positive market momentum that we saw in Q4 of 2025. To dampen those positive vibes however are a trifecta of concerning factors - 1) it’s unclear if this positive momentum is a short-lived blip or the start of a sustained recovery, 2) the industrial sales market remains very slow, and 3) the geopolitical landscape presents new and growing uncertainties for the broader economy.

Leasing

The headline number in the leasing market is the decline in the GTA-wide vacancy rate from 4.5% in Q4 of 2025 to 4.2% in Q1 of 2026. To put this in context, the vacancy rate had been on a relentless upward march since Q3 of 2022, rising for 13 consecutive quarters before flattening at 4.5% for two quarters (Q3 and Q4 of 2025). This latest drop of 0.3% represents the first meaningful downward movement in the vacancy rate since the market began its softening cycle and is all the more notable given that it occurred in Q1, a quarter that has historically tended to see vacancy tick upward as landlords list new space after the turn of the year.

There are two schools of thought emerging among market participants at the moment. The first is that we are witnessing the beginnings of a true and sustained (albeit very gradual) recovery, one that is buoyed by strengthening conviction among occupiers and tightening supply conditions. The fact that the GTA-wide industrial vacancy rate has been flat over recent quarters and has now dipped materially in this latest quarter provides confidence to those in this camp who believe that the market has reached its nadir and is on its way up.

The second school subscribes to the theory that what we saw in Q1 of this year, and really since the last quarter of 2025, was simply a concentrated and acute spike in activity from the many businesses who delayed and deferred throughout 2025 and finally reached a point when they were ready to sign new leases. The thinking is that some of these tenants realized that the tariffs and broader economic headwinds did not produce the doomsday scenario they had feared, while others simply reached a point where they could no longer defer real estate decisions regardless of the external environment. Even if one believes in that view, the question now is whether we’ve mostly depleted that pool of tenants who were in that scenario and we are now left with a less motivated crop of occupiers. In other words, now that the most motivated tenants have absorbed space after a period of relative inactivity, do we fall back into a steady (and slower) market equilibrium?

The reality is that neither of those market views is negative, and strongly negative views about industrial leasing at the moment are hard to come by. Most market players would agree that at the very least we’ve reached a reprieve from the worsening market conditions and have entered a flatter phase, and in the more optimistic view we’re at the start of a meaningful recovery and potential bull run.

Recent anecdotal feedback from the brokers “on the ground” at the time of this writing suggests that the most recent industrial lease listings are not quite getting as much traction as listings from the start of the year, which suggests that we have indeed fallen into a flatter pocket of the market after exhausting some of the pent-up demand from tenants.

On a submarket basis, the vacancy rate decline was broad but not universal. GTA West, the largest industrial submarket in the region, saw a significant drop from 5.4% in Q4 to 4.7% in Q1, a 0.7% reduction and particularly encouraging given that GTA West was among the hardest hit markets over the past two years due to the volume of large-bay speculative development that came online in this pocket. GTA East also showed improvement, with vacancy declining from 7.2% to 6.7%, continuing a pattern of choppy but directionally improving conditions in Durham Region. Toronto Central held steady at 3.1% for a second consecutive quarter, continuing to demonstrate the relative stability of the city’s core industrial markets where supply has always been more constrained.

Average asking net lease rates across the GTA overall were essentially flat at $16.49 PSF, down only slightly from $16.52 in Q4 and marking a seventh consecutive quarterly decline, though the rate of decline has essentially flattened. After asking rates peaked at $18.11 in Q2 of 2024 and subsequently fell each quarter, the deceleration of that decline suggests that the market may be approaching or has reached a floor. What’s worth noting as well is that there is a natural lag between increased leasing activity and landlords adjusting their asking rates to reflect the bump in demand. What usually occurs behind the scenes at the start of a market recovery, which is not fully apparent in the data, is that landlord concessions are less stretched and deal rates start to inch up closer to asking rates, and only after it’s clear that the market is strengthening do landlords begin to adjust their expectations upward.

On the new supply front, industrial space under construction in the GTA continued to decline in Q1, dropping approximately 6% from the previous quarter. With 51 buildings totalling roughly 12.7 million square feet under construction, the development pipeline continues to shrink from its elevated levels of a few years ago. This reduction in new supply coming online is a tailwind for the leasing market and should support continued tightening of the vacancy rate assuming demand remains stable or improves.

Sales

On the sales front, the industrial market in the GTA continues to tell a story that is quite different from the leasing market. While leasing activity has shown signs of a pickup, the sales market remains very slow and characterized by a persistent standoff between buyers and sellers.

Total transaction volume for Q1 came in at approximately $1.2 billion, an increase from Q4’s $1.02 billion and roughly in line with Q1 of 2025 ($1.19 billion). While higher than recent quarters, these volumes remain well below the $2-3 billion quarterly averages that were commonplace during the peak period of 2022 and 2023. The average sale price per square foot across the GTA was $355, essentially unchanged from $354 in Q4 and continuing a trend of remarkably flat pricing that has persisted since the start of 2024 when the average hovered around $358.

The dynamics driving this stasis on the sales side have been discussed at length in these pages and they have not changed materially. On the buyer side, there is continued caution around making acquisition decisions which, unlike leasing decisions, require a greater degree of conviction in both the broader economic outlook and the buyer’s own business trajectory. Purchasing an industrial property is a long-term commitment that involves significant capital deployment, and many potential buyers are simply not yet comfortable making that bet in an environment where geopolitical and economic uncertainty remains elevated. This is particularly true for investors, who continue to sit on the sidelines given compressed cap rates that do not pencil out relative to current borrowing costs, especially for smaller to mid-sized transactions.

On the seller side, the picture is equally static. As has been discussed many times in this commentary, there is very little distress among industrial property owners in the GTA. Most owners acquired their properties years or even decades ago at significantly lower valuations, carry minimal debt, and have no financial pressure to sell. As a result, many sellers are content to wait on the sidelines for what they perceive to be more favourable market conditions that would maximize the return on a sale. The sellers who are transacting tend to be motivated by personal circumstances such as family planning, estate considerations, financial restructuring, retirement, etc, rather than by market conditions. The result is a thin market with limited supply of properties for sale, which in turn supports the pricing resilience that has been seen in the GTA industrial sales market throughout this cycle.

Looking Ahead

There is reason for optimism in the GTA industrial leasing market as we progress through 2026, but there are also signals that the recent bump in leasing activity may not be fully sustained and will fall back to more muted levels. Whether that will be the case and what those new baseline levels look like is anyone’s guess, but it’s fair to say that the worst of the downward trajectory in the market is likely behind us.

On the sales front, there really is no compelling narrative. Transaction activity remains slow, sale inventory remains limited, and pricing remains very flat. As much as leasing activity is driven by landlords that need to turn over vacant space and tenants that need to obtain space for a variety of reasons, sales are much more discretionary in nature for both the sellers and the buyers, and both groups are exercising that discretion by sitting on their hands.

Newly emergent geopolitical and macroeconomic influences are no doubt casting a shadow of uncertainty over the entire market at the moment. Just as market participants were acclimating themselves to the fallout from tariffs, and in many cases realizing the sky was not falling, new global uncertainties have emerged that are impacting everything from inflation, interest rates, and economic projections. If these events subside, we may see a new spark of recovery in the market as sentiment turns more optimistic, but the more likely scenario is that continued (or new) uncertainties will continue to keep the market relatively flat and balanced. Considering the weakness seen throughout 2024 and 2025, flat and balanced looks pretty good.