- What Asking industrial rents in the GTA have slipped for the sixth successive quarter, Colliers said
- Why More industrial tenants are rejecting pricey lease renewals and taking advantage of low rates to acquire space
- What next Demand for industrial condos is rising in the region
The Greater Toronto Area industrial leasing market appears to be shifting towards a period of stabilization, with the availability rate holding steady and rents continuing to slide, Colliers said in a new report.
Available industrial space was at 4.2% for the first quarter of the year — unchanged from the previous quarter — while asking rents slipped to $17.37/sq ft on average for the region, the brokerage said.
The drop marks a sixth consecutive quarter of decline following several uninterrupted years of growth in the GTA, where rents averaged 20% year-over-year increases from 2016 to 2022. During that time, new construction climbed as new industrial properties went online in response to the push for warehouses and other facilities supporting e-commerce operations.
“We’re entering a new market phase where rents are slowly tapering off,” Victor Cotic, Colliers executive vice president of national investment services, told Green Street News. “Still, from a North American standpoint, it’s a very tight market sitting at 4% availability. There are a lot of U.S. markets that would be very happy to have 4%.”
Around 2m sq ft of industrial space was absorbed by the market in Q1, continuing a trend of positive absorption. Leasing, however, slowed compared to the previous two quarters as occupants hesitated on signing new agreements over tariff concerns and other economic uncertainties.
On the investment side, Colliers found that industrial tenants are increasingly leveraging competitive financing rates to acquire industrial space rather than renewing leases at inflated market-level rents.
With a critical undersupply of small-bay industrial property in the GTA, Cotic, based in Toronto, said investment interest is growing for ground-up industrial condominiums, which can satisfy the space needs of industrial users while offering modern clearance heights and other amenities.
Developers such as Beedie, out of Vancouver, are happy to fill the GTA demand for small industrial space by developing industrial condos.
“Beedie came over to the GTA and found success, and our market relative to what happens in Vancouver is still greatly underserved,” Cotic said.
“The challenge is: If you’re an occupant that’s in a 3,000 to 20,0000 sq ft space, there aren’t a lot of opportunities to buy because nobody has built buildings that small and they don’t become available too often.”
