The market for industrial spaces in the Greater Toronto Area exceeding 100,000 sq ft is undergoing seismic shifts, Colliers senior vice president Matt Albertine says.
The availability rate for Toronto’s industrial market increased in Q4 to 4.2%, marking the eighth consecutive quarterly increase and the highest level in nearly a decade. However, the increase was the smallest since mid-2023, suggesting the tide may be turning.
These shifts came in the wake of record-breaking construction. In 2019, the western side of the GTA had 16 big-box buildings over 100,000 sq ft available, falling to nine by 2022. By 2024, however, availability jumped to 67 buildings. This changing market has prompted evolving tenant strategies and shifting lease dynamics, Albertine says.
Green Street News sat down with Albertine to talk about the changes underway in the GTA’s industrial market for buildings exceeding 100,000 sq ft.
What was behind the construction boom?
The reason why the development community was building significantly larger square footage was to meet demand, but more importantly, it’s the cost to construct the building.
Because the development pro forma is land acquisition, development charges and construction costs versus lease rates, it doesn’t make a lot of sense to build smaller buildings due to the cost of construction and land acquisition prices. However, something to consider moving forward is the ability to make buildings that are divisible — that have the ability to be chopped up into smaller units — but there’s also a cost to that.
Can you talk about the seismic shifts you’re seeing?
On the development side, developers need to be strategic and think about where and when they’re putting shovels in the ground, versus continuing to build for the sake of deploying capital and growing the market. We’ve seen a big shift back to core markets. Core markets in the GTA would be Mississauga, Brampton and Vaughan. Why is that? [They’re] close to the intermodals, airports and labour. Whereas in the pandemic, we saw more of a shift to anywhere that’s available, meaning you were seeing developers that traditionally didn’t own in tertiary markets buy in tertiary markets hoping tenants would lease space anywhere available, which was true at the time.
They were buying and building bigger [buildings]. When you look at the data, the average lease size in markets such as Oakville and Burlington, for example, over a 10-year period has been about 25,000 to 30,000 sq ft spaces, and if you’re building a building that’s significantly larger than that … you’re going to have to attract a tenant that needs a larger square footage size. They do exist, but most of those tenants want to be in a Peel or York region just due to the infrastructure, labour and supply chains.
The landlord aspect falls very close to the developer part. When you’re seeing such an uptick in inventory, you need to understand and analyze how your buildings are positioned against the competition in terms of pricing or different features that would make it more marketable or attractive to a tenant.
On the tenant side, they have more choices today — it’s supply and demand. It allows for an opportunity to analyze and review their supply chain and maybe move to a new location that is more favourable that perhaps they wouldn’t have done a few years ago because there wasn’t enough availability to negotiate a deal that makes the most sense for their business.
How unique is this trend to Toronto?
Toronto is still one of the tightest markets in North America, and the trend is very similar across all major markets in the U.S. and Canada. It’s not a Toronto problem; it’s an overall demand and market timing [situation].
A lot of companies absorbed a lot of space throughout the pandemic, so it’s natural for organizations to analyze costs. Landlords also did some excellent deals and provided amazing returns for their investors during this period, and a ton of money has been poured into the industrial real estate market.
How do you see this year’s new supply affecting tenant strategies?
The new supply figures for 2025 are lower than 2024, projected at 11.7m sq ft of new supply, which is down from 15.7m sq ft in 2024 and dropping to 9.5m sq ft in 2026. The truth is the development community is pausing a lot of projects, which means we’re going to have less new supply in the market. That means, if our net absorption numbers do increase, we will chew through a lot of the projects and existing supply in the market, which should bring down availability.
How is the trade war impacting the GTA’s industrial market?
The elephant in the room is what’s going on in the U.S. with these potential tariffs and how that impacts businesses that are in aluminum, steel [and] automotive — do they shift their supply chain and industrial operations fully to the United States, or do they take part of the business and put it into the U.S.? That’s a conversation we’re having with almost every tenant.
Global supply chains are changing as organizations look at their [needs] in certain markets for manufacturing, such as China, where Vietnam is the beneficiary. In North America, we are getting calls from U.S. companies needing distribution networks in the Canadian market.
There’s been a trend for shorter leases. Are you also seeing opportunities for longer-term deals?
When you look at the data and correlate the average lease terms to what rental rates were at the time and what the availability was at the time, it makes a lot of sense why tenants were “setting and forgetting” so to speak, specifically in 2019. If you look at the run-up in rental rates from 2019 to 2022, it was significant — 30% in back-to-back years.
Today, people are doing shorter-term deals for a couple reasons, from my perspective. Number one is due to the tariffs and economic uncertainty. Number two, I think a lot of tenants have multiple locations and prefer flexibility.
Today is a very advantageous time for tenants to look at longer-term transactions because where we are in the market cycle would indicate an opportunity to set your destiny if you’re a manufacturing company, or [if] you’re someone who has heavy automation in the building, to take advantage of the market conditions, the amount of incentive being provided and really negotiating a deal that makes sense for the business long term.
It’s a great opportunity for someone if they want to do a 10-15 year deal. There couldn’t have been a better time [than in the past four years] in retrospect, and probably between now and six months from now. It also depends on what kind of business you are. A warehousing company that can get up and move can be more [nimble] than a manufacturer who invested $100m-plus into a building.
