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 year-end 2025, up slightly from 3.0% a year earlier and unchanged from the 3.2% recorded the previous quarter, but at its highest point since early 2015. Availability, particularly for sublease space, fell notably. Strengthened leasing velocity through 2025 provided a welcome boost to GTA industrial fundamentals that resulted in improved market stabilization after two years of post-COVID recalibration amid economic turbulence arising from U.S. trade disputes. An ongoing resurgence of the GTA industrial market will be supported in 2026+ by the federal government’s budgetary response to U.S. tariff threats, which outlined investments and incentives to boost Canadian industrialization. Federal tax incentives such as the Productivity Super-Deduction, which allows for the faster write-off of capital investment related to real estate acquisitions used for manufacturing/processing, will likely drive additional industrial activity. Halton Region had the highest industrial vacancy rate in the GTA at 7.1%, followed by Durham (5.8%). York Region and Toronto were tied for the tightest submarket (2.1%) in the region with Peel Region at 3.2%. Project deliveries continued to decline in 2025 as the new development pipeline narrowed to ~8.6 msf at year-end 2025, the least amount of new GTA industrial space under construction since mid-2018. A flight-to-quality trend defined much of GTA’s industrial leasing activity in 2025, particularly in core markets; however, availability in buildings with higher clear heights has declined notably as a result. York and Toronto charged top rents at year-end 2025 with rate growth occurring in Toronto and Durham, the region’s least expensive submarket, where rents rose as tenants enjoyed the GTA’s lowest industrial rates. Sale proceeds of ~C$5.4B for GTA industrial assets in 2025 marked a slight decline from 2024 (~C5.6B) and was the lowest industrial sales total since 2020 as financial institutions tighten lending criteria.
Download Toronto Industrial Market Report 4Q25
