Stable demand and shrinking sublease space kept Toronto’s industrial market on solid footing
Industrial real estate in the Greater Toronto Area ended 2025 in better shape than many investors expected, with space still filling up even as new supply hit the market and trade tensions weighed on sentiment.
According to Avison Young’s Q4 2025 Greater Toronto industrial report, the region posted “positive net absorption of 4.2 million sf during the fourth quarter,” bringing full‑year absorption to “3.6 million sf.” That meant more space was leased than vacated despite a choppy macro backdrop of tariffs and slower global trade.
The availability rate stood at 4.3% in Q4 2025, a 40‑basis‑point decline year over year, even as newly completed buildings added vacancy in several submarkets.
Sublet listings also thinned out. Avison Young reported that “several larger transactions during 2025 have tightened available sublet space by 27% (1.8 million sf) from one year ago and by nearly 32% (2.4 million sf) compared with the height of sublet availability in Q2 2025 when almost 7.5 million sf was available.”
Development pipeline narrows but demand for modern space persisted
The construction pipeline told a different story. Projects under way dropped to 18 buildings totalling 9.1 million square feet, down sharply from “69 buildings totalling 19.5 million sf three years ago” as developers faced “reduced tenant demand, high costs paid for land at the peak of the market, and pricing uncertainty for speculative development (material, labour and tariff costs).”
Speculative deliveries are expected to keep slowing through 2026, the report said, even as design‑build projects for committed users continued to move ahead.
Rents eased from pandemic‑era peaks but remained elevated on a five‑year view. Across the GTA, the average asking net rental rate was $16.56 per square foot, down 6.6% year over year and 3% over three years, but up 65% over five years.
GTA North commanded the highest average net rents at $17.55 per square foot, while GTA East remained the most affordable at $15.01 per square foot.
Industrial remains a favoured asset class for lenders and investors
The picture in Toronto aligns with a broader national tilt back to fundamentals. Industrial and multi‑residential assets continued to lead commercial transactions across Canada in 2025 as investors focused on income durability and long‑term demand drivers such as e‑commerce, logistics and reshoring.
Moreover, most market observers expect the industrial sector to keep its place as one of the most prominent asset classes in the commercial realm as others stage a slow recovery.
Avison Young’s national outlook describes “incremental recovery across the industry” heading into 2026, even as tariffs and central bank decisions remain key risk factors for cap rates and financing costs.
That means “positive, but certainly not robust” prospects for the economy and industrial sector, according to Morguard’s senior director, research Keith Reading.
“But if we do see some sort of agreement on trade and trade stability, I think businesses will know what the environment’s going to be like, and they can dust off those expansion plans, and we could see economic activity and growth increase toward the end of 2026,” he told Canadian Mortgage Professional.
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