Toronto Real Estate Market Reports

Toronto Office Market Report

Downtown Toronto office vacancy fell to 13.0% at the close of 2025, down from 13.2% the quarter previous and from 13.6% a year ago after peaking at 14.8% in the third quarter of 2024. Despite economic uncertainty, annual absorption in 2025 totalled ~1.6 msf, the most annual absorption recorded downtown since 2017, the vast majority of which occurred in trophy/class A premises. Leasing activity in the Financial Core led all downtown submarkets at the end of 2025 due to a push from Canada’s ‘Big 5’ banks to implement return-to-office mandates in primarily trophy/class A premises. The delta between availability and vacancy in the Financial Core tightened to 310 basis points at year-end 2025, the smallest gap between the two since early 2020, a signal new construction may soon be required. Overall sublease vacancy continued to decline downtown due in large part to the tightening of sublease vacancy in class B/C properties, one of the only sources of leasing activity occurring outside of trophy and class A assets. Overall vacancy, while declining, will remain elevated until the significant amounts of obsolete office space in fringe downtown submarkets, particularly Downtown North and East, are redeveloped, demolished or leased. While tenants have largely remained drawn to the well-connected, central submarkets of Downtown South and the Financial Core, an increasing number are having to choose between location and quality of space in other submarkets. The role of class B/C office space downtown, which remained impaired by elevated vacancy, will need to come into focus in 2026+ as either a relief valve for strong tenant demand or subject to redevelopment, demolition or conversion. With phase two of CIBC Square the last large office tower under construction downtown fully preleased, the ongoing pressure from tenant demand for trophy space may lead to the announcement of a new development in 2026.

Toronto Industrial Market Report

GTA industrial vacancy was 3.2% at third-quarter 2025, up slightly from the 3.0% recorded a year earlier and virtually unchanged from the 3.1% recorded the previous quarter. Heightened leasing velocity through third-quarter 2025 saw the prior sense of economic unease and uncertainty related to the threat of U.S. tariffs exceeded by a need to move forward. While sublease availability in third-quarter 2025 declined by 25% when compared with the record high set at mid-2025, more than 5.6 msf remained available, primarily in Peel region. Rent differentiation among submarkets impacting tenant decisions as occupiers seek lower rents as the floor for headlease rates is being softened by competitive sublease space. Halton had the highest industrial vacancy rate in the GTA at 7.7%, followed by Durham (5.0%). York was the tightest submarket (1.8%) followed by Toronto at 2.6%. Peel sat at 2.9%. More than 11.4 msf was under construction in the GTA at third-quarter 2025, an increase from the 9.8 msf under construction a year earlier and up from 10.9 msf in the previous quarter. The evolving transformation of GTA’s post-Covid industrial market is highlighting regional resiliency as demand remained robust in the face of challenging macroeconomic indicators. Tenants with strong covenants are better positioned to secure better lease rates and concessions from landlords, while tenants without such finances offered less favourable terms. Sale proceeds of ~$4.1B for GTA industrial assets at the third quarter of 2025 was virtually unchanged from the same period in 2024, which was the lowest total since the first nine months of 2020.