Toronto Office Market Report
Downtown Toronto office vacancy hit 14.0% at mid-2025, up slightly from 13.8% the quarter previous but down from a year ago after peaking at 14.8% in the third quarter of 2024. Absorption in the first six months of the year totalled ~960k sf, the most absorption recorded in the first half in Toronto’s downtown office market since 2017 despite high economic volatility. Leasing activity in the Financial Core led all downtown submarkets at mid-2025 with U.S. tariff threats and the associated economic uncertainty seeming to have little impact on activity. The delta between availability and vacancy in the Financial Core tightened to 380 basis points at mid-2025, the smallest gap between the two indicators since the third quarter of 2020. 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 class A assets. With no large net new tenants making (pre) lease announcements in the Downtown core in the first half of 2025, vacancy, while declining, will remain elevated due to significant amounts of obsolete backfill space not being occupied. Four of five of Canada’s ‘Big Five’ banks – BMO, Scotiabank, RBC and TD Bank - all announced new return to office policies commencing in the back half of 2025 that will have employees back in the office at least four days per week, After 5+ years of rising vacancy and availability due to anemic leasing and an exodus of tenants, both Downtown North and East are increasingly likely to be subject to an intensification of redevelopment and/or demolition of dated inventory. With phase two of CIBC Square the last large office tower under construction downtown, the ongoing pressure from tenant demand for trophy space may lead to an announcement of a new development, which would be a first since pre-COVID.
Toronto Industrial Market Report
GTA industrial vacancy was 3.1% at mid-2025, up notably from the 2.3% recorded at mid-2024. Regional vacancy was less than 2% from mid-2017 through 2023. Leasing velocity in the first half of 2025 – particularly the second quarter – was hampered by a sense of economic unease and uncertainty related to the threat of U.S. tariffs. Sublease availability hit a record high at mid-2025 due to a combination of new supply, rightsizing and cautious trade-exposed tenants limiting costs by reducing future space requirements. Rent differentiation among submarkets impacting some tenant decisions as occupiers seek lower rents as found in submarkets such as Durham/Halton as the floor for rates firms up in GTA. Halton had the highest industrial vacancy rate in the GTA at 7.5%, followed by Durham (5.2%). York was the tightest submarket (1.7%) followed by Toronto at 2.1%. Peel sat at 3.1%. More than 9.5 msf was under construction in the GTA at mid-2025, a drop from the 12.1 msf under construction at mid-2024 and substantially down from 16.7 msf at the start of 2023. Ongoing reform of supply chains in GTA’s post-Covid industrial market is being exacerbated by uncertainty from U.S. tariff threats resulting in a range of evolving tenant requests. Some tenants are seeking shorter terms of one year or less and/or reduced rent to remain flexible and mitigate uncertainty as business impacts of U.S. tariff threats vary among industries. Sale proceeds of ~$2.6B for GTA industrial assets in the first half of 2025 was the lowest dollar volume recorded in the first half since 2019 and was down 11% from the first half of 2024.
