GTA Commercial Real Estate Market: What Landlords Need to Know in 2025

The GTA Commercial Landscape

The Greater Toronto Area remains one of North America's most dynamic commercial real estate markets. With a population approaching 7 million, continued immigration, and a diversified economy, the fundamentals supporting commercial real estate remain strong.

But not all sectors are created equal. Understanding where opportunities and risks lie helps you make better decisions about your commercial property.

Industrial: The Continued Standout

The industrial sector has been the clear winner in GTA commercial real estate, and this trend continues into 2025.

Current Market Conditions

Vacancy Rates: Sub-2% across most of the GTA—effectively full occupancy

• **Rental Rates:** Continued upward pressure
• Prime locations: $18-22/sq ft net
• Secondary areas: $14-18/sq ft net
• Rates have tripled in some areas over the past decade

Cap Rates: 4.5%-6% depending on location and tenant quality

• **Demand Drivers:**
• E-commerce requiring last-mile distribution
• Supply chain resilience (more local inventory)
• Manufacturing reshoring trends
• Limited new supply due to land constraints

What This Means for Landlords

• **If You Own Industrial:**
• Asset values have increased substantially
• Rental upside on lease renewals
• Strong buyer demand if selling
• Low vacancy risk

• **Considerations:**
• Rental rates may be peaking in some areas
• Interest rate increases have moderated values
• New supply in Hamilton/Niagara may affect outer GTA

Retail: A Tale of Two Markets

Retail has bifurcated into winners and strugglers. Location, tenant mix, and format determine success.

What's Working

• **Grocery-Anchored Plazas:**
• Essential retail proves resilient
• Grocery traffic drives ancillary tenant sales
• Stable occupancy and reliable income
• Strong investor demand
• Cap rates: 5%-6.5%

• **Neighborhood Service Retail:**
• Services that can't be delivered online: salons, dental, fitness
• Medical and professional services
• Quick-service restaurants
• Pet services and veterinary

• **Well-Located Street Retail:**
• High-traffic pedestrian areas
• Areas with strong demographics
• Mixed-use urban locations

What's Struggling

• **Power Centers and Big Box:**
• Department store anchors weakening
• Large format retail facing headwinds
• Redevelopment potential in some cases

• **Commodity Retail:**
• Products easily purchased online
• Tenants without experiential elements
• Secondary locations with traffic declines

Retail Considerations

• **If You Own Successful Retail:**
• Focus on tenant quality and mix
• Build in rental escalations
• Maintain property condition
• Consider long-term tenant relationship over short-term rent

• **If You Own Struggling Retail:**
• Evaluate redevelopment potential
• Consider alternative uses (residential conversion, medical)
• Realistic pricing if selling
• Proactive tenant replacement

Office: The Evolving Sector

Office has faced the most uncertainty post-pandemic, though the picture is becoming clearer.

Current Conditions

• **Vacancy Rates:**
• Downtown Toronto: 12-15%
• Suburban markets: 15-20%
• Elevated from pre-pandemic 5-8%

• **Rental Trends:**
• Class A maintaining rates better
• Class B/C facing significant pressure
• Tenant improvement costs increasing
• Free rent and concessions common

Cap Rates: 5.5%-9% depending on quality and location

Flight to Quality

• Tenants are upgrading to higher-quality space:
• Better buildings at similar or lower total cost
• Amenities matter more for attracting employees
• ESG and sustainability becoming requirements
• Older buildings losing tenants

Hybrid Work Impact

• The long-term picture:
• Most companies adopting hybrid models
• Less space per employee but better space
• Hot desking and flexible layouts
• Location near transit more important

Office Considerations

• **If You Own Class A:**
• Maintain competitive amenities
• Invest in sustainability upgrades
• Build relationships with tenants
• Flexible lease structures

• **If You Own Class B/C:**
• Evaluate conversion potential (residential, lab, data center)
• Significant capital investment may be required to compete
• Consider selling before further erosion
• Be realistic about market position

Multi-Family: The Stability Play

Purpose-built rental has become increasingly attractive to commercial investors.

Market Fundamentals

Vacancy Rates: 1-3% across most of GTA Rental Growth: 5-10% annually in recent years Cap Rates: 3.5%-5% (lowest among major property types)

• **Demand Drivers:**
• Housing affordability crisis pushing ownership out of reach
• Immigration adding 400,000+ annually to Canada
• Limited rental supply vs. demand
• Demographic trends favoring renting

Why Investors Love Multi-Family

• - Stable, predictable income
• Less tenant concentration risk
• Strong fundamentals unlikely to change
• Favorable financing available
• Significant rental upside in older buildings

Cross-Sector Themes

Interest Rate Impact

• After significant increases in 2022-2023:
• Rates have stabilized at higher levels
• Cap rate expansion has occurred across sectors
• Buyer expectations have adjusted
• Financing is available but more expensive
• Cash-on-cash returns under pressure

Immigration and Population Growth

• Canada's aggressive immigration targets support:
• Housing demand (rental and sales)
• Retail demand from population growth
• Industrial demand from consumption
• Office demand from employment growth

Infrastructure Development

• Major transit projects affecting values:
• Eglinton Crosstown
• Finch West LRT
• Ontario Line
• GO expansion

Properties near transit stations gaining value.

2025 Outlook and Opportunities

Watch List

Industrial: Continued strength but watch for rental rate plateaus in some markets

Retail: Quality matters more than ever; grocery-anchored remains favored

Office: Recovery continuing but bifurcated; Class A in transit-served locations strongest

Multi-Family: Stable and attractive; competition for assets remains fierce

Opportunities for Action

• **If Selling:**
• Industrial timing still favorable
• Well-performing retail attractive to buyers
• Office selling requires realistic expectations
• Multi-family demand exceeds supply

• **If Buying:**
• Office represents value opportunity for patient capital
• Secondary retail with redevelopment potential
• Industrial increasingly competitive

• **If Holding:**
• Focus on tenant retention and lease extensions
• Maintain property condition
• Monitor lease expirations and plan ahead
• Consider refinancing if debt is maturing

Getting Local Market Intelligence

Every property is unique, and general market trends only tell part of the story. Understanding what buyers are paying, what tenants are signing, and where demand exists requires local expertise.

We provide GTA landlords with market intelligence specific to their properties and situations.

Get a market assessment for your commercial property