GTA Commercial Real Estate Insights

The Greater Toronto commercial investment market has entered a more stable phase as clarity around borrowing costs improves and capital positions strengthen. REMAX Canada’s national commercial report points to a measured return of investor confidence through Q1 2026, with deferred capital re engaging where pricing has reset and income durability is clear. Narrowing gaps between buyers and sellers have translated into more consistent trades in high quality, income producing product, especially in multi residential and industrial. Private investors, REITs and institutional buyers returned to the multi residential segment in late 2025 and have carried that momentum into 2026, targeting assets with proven rent collections and embedded upside as turnover releases units to market rates. While cap rates remain several basis points wider than 2021 peaks, the current spread to bond yields is once again supporting risk adjusted allocations to real assets. Activity remains selective rather than volume driven, but there is now a discernible floor on pricing for best in class assets.

TRREB Commercial Network Members recorded 7,894,424 square feet leased through MLS in Q4 2025, a 12.5% increase over 7,021,769 square feet in Q4 2024. Industrial sales transactions totaled 69, down sharply from 118 the previous year, reflecting cautious capital deployment. Average net lease rates for disclosed industrial deals reached $15.02 per square foot, a 7.9% decline from $16.29. This pricing adjustment coincides with broader market resets targeting quality assets. Owner occupiers dominate activity, pursuing flexible spaces in established parks. Inventory constraints in supply tight markets like nearby Ottawa underscore GTA's relative balance.

TRREB data reveals commercial/retail lease rates averaged $29.97 per sq ft net in Q4 2025, a sharp rise from $25.34 in Q4 2024, reflecting 18% year-over-year growth. This uptick occurred alongside 7.89 million sq ft leased across all commercial categories, up from 7.02 million sq ft the prior year. Retail sales transactions totaled 100 in the quarter, down from 134, signaling cautious but focused investor activity. Grocery-anchored and service-oriented retail led performance, with tight vacancy rates constraining supply in key GTA nodes. Landlords exercised pricing power, holding out for premium rates on high-quality assets. Absorption remained positive as demand outpaced new deliveries.

Return-to-office policies have accelerated leasing in GTA's top-tier office properties during Q1 2026. Demand concentrates in triple-A buildings with modern amenities in downtown Toronto, where absorption reached levels unseen since 2024. Suburban markets like Mississauga and Markham report strong tenant interest prioritizing cost and accessibility, with net absorption exceeding 500,000 square feet across these nodes. Older downtown assets struggle with persistent availability, pushing vacancy in Class B and C stock above 15 percent. Investors deploy capital selectively into stabilized assets generating reliable cash flow. This divergence underscores a market reset favoring quality over quantity.

Urbanation data shows vacancy in stabilized buildings completed since 2000 reached 5.4% in Q1 2026, more than double the 2.6% from Q1 2024. This marks the latest in a softening trend as supply outpaces demand. Completions fell 61% year over year to 915 units in Q1, yet Q2 schedules 3,261 units across 17 projects. National trends align with Yardi reporting Canada wide vacancy at 5.1% in Q1, up 110 basis points year over year. Toronto delivered 26,798 apartments in the 12 months to February 2026, down 5.4% from prior year. Softening rents reflect weaker negotiating power for landlords amid ample choice.

Retail investment leads the GTA sector with RioCan REIT reporting 98.9% occupancy in Q1 2026, matching prior year levels. The firm embedded annual rent escalations in 95% of new leases, reflecting supply constraints that pushed average asking rents to $28.45 psf net, up 4.2% YoY. Absorption totaled 450,000 sq ft in Q1, concentrated in grocery-anchored power centers. Notable transactions include the $165M sale of a Mississauga plaza at 5.2% cap rate, signaling investor preference for stable cashflow assets. Overall, retail cap rates averaged 5.4%, down 20 bps QoQ as buyers compete for irreplaceable locations.

JLL's Q1 2026 Toronto Industrial Market Dynamics reveals vacancy rates stabilized at 4.2 percent across the GTA, down slightly from 4.5 percent in Q4 2025. Net absorption reached 1.8 million square feet, driven by logistics and e-commerce tenants in Peel and Halton regions. Asking rents averaged $15.60 per square foot triple net, flat quarter over quarter but up 2 percent year over year. Major transactions included a 450,000 square foot lease by a third party logistics firm in Mississauga at $16.20 per square foot. Construction deliveries totaled 2.1 million square feet in Q1, with 70 percent pre leased, limiting availability in modern high bay spaces. Cap rates compressed to 4.8 percent for Class A assets, reflecting investor confidence in long term income stability.

TRREB data shows Q4 2025 commercial/retail net lease rates reached $29.97 per sq ft, a 18.3% increase from $25.34 in Q4 2024, reflecting sustained tenant demand amid limited supply. Total leased space across all commercial categories hit 7.89 million sq ft, up 12.5% from 7.02 million sq ft the prior year, with retail transactions contributing significantly. Retail sales volume dipped to 100 deals from 134, indicating selective investor activity focused on high-quality assets. RioCan ended 2025 with 98.5% occupancy in its wholly-owned retail portfolio, completing 366,000 sq ft of new developments transitioned to income-producing status. This leasing momentum extended into early 2026, with 15 transactions closed in the first two months. The shortage of well-located retail space continues to drive top retailers toward established REIT portfolios.

Downtown Toronto's office vacancy rate contracted by 120 basis points to 13.4% in Q1 2026, driven by over 2.1 million square feet of net absorption, the highest quarterly total in recorded history. Class AAA and A assets captured the bulk of this demand, with Class A vacancy improving 600 basis points over the past 12 months. National office vacancy also declined 100 basis points year-over-year to 13.6%, reflecting a broader recalibration. Toronto led six of 11 Canadian markets with positive absorption, underscoring its role in sector recovery. Large block vacancy shrank further, shifting activity to the Greater Core as Financial Core demand spilled over. This momentum aligns with return-to-office mandates boosting downtown optimism.

Urbanation reports the vacancy rate in GTHA stabilized buildings completed since 2000 reached 5.4% in Q1 2026, more than doubling from 2.6% in Q1 2024. This marks the ninth straight quarter of rising national vacancy at 5.1%, with new lease rents turning negative across most markets. Q1 completions dropped 61% YoY to 915 units, an eight-quarter low, as developers delayed occupancy. Yet Toronto delivered 26,798 apartments in the 12 months to February 2026, down 5.4% YoY. Ontario completions rose 4.1% to 48,816 units in the same period. Supply pressure persists with 17 projects totaling 3,261 units slated for Q2 occupancy.

Total commercial sales transactions in the GTA fell to 211 in Q4 2025, a 31% decline from 307 in Q4 2024, reflecting investor restraint in a high-interest environment. Office sales dropped to 42 deals from 55 year-over-year, while industrial transactions halved to 69 from 118. Commercial/retail sales reached 100, down 25% from 134 prior year. Average net lease rates for office spaces rose to $22.23 per sq ft, up 19% from $18.74 in Q4 2024, supporting compressed cap rates around 5.5-6% for Class A assets. Industrial rates softened to $15.02 per sq ft from $16.29, pressuring yields in logistics plays. This bifurcation favors office investors repositioning for hybrid work trends.

JLL's Q1 2026 Toronto Industrial report records positive net absorption of 2.1 million square feet across the GTA, driven by logistics and e-commerce demand in Peel and York regions. Vacancy tightened to 4.2 per cent from 4.8 per cent in Q4 2025, with the airport submarket leading at under 2 per cent availability. Asking rental rates held firm at $14.50 per square foot net GTA-wide, up 2 per cent year-over-year, while prime properties in Mississauga commanded $16.20/sf. Construction deliveries totaled 1.8 million sf, primarily pre-leased big-box facilities exceeding 200,000 sf. Under-construction pipeline stands at 15.2 million sf, concentrated in GTA West, signaling sustained competition for space into 2027. Speculative development slowed to 12 per cent of pipeline due to elevated land costs averaging $450 per buildable sf.

TRREB Commercial Network reported 7,894,424 square feet leased across all commercial types in Q4 2025, a 12.5% increase from 7,021,769 sf in Q4 2024. Retail-specific activity drove commercial/retail leasing rates to $29.97 per square foot net, rising 18.3% year-over-year from $25.34. This uptick reflects stronger tenant demand in high-traffic corridors like Yonge-Eglinton and King West, where grocer-anchored plazas saw full occupancy renewals. Total commercial sales dropped to 211 transactions from 307, signaling selective investor caution amid economic headwinds. No Q1 2026 retail vacancy data emerged, but Q4 momentum suggests absorption exceeded 1.5 million sf in retail submarkets.

A pronounced flight to quality is reshaping Toronto's office landscape, with class-AAA trophy assets significantly outperforming secondary stock. Downtown core vacancy stands at approximately 9%, but class-AAA space trades at just one-third that rate, indicating sustained institutional demand for prime real estate. Occupancy levels in downtown offices now reach 85–90% Monday through Thursday, spiking to 96% on Wednesdays—a dramatic reversal from pandemic-era contraction. This recovery is driven by major financial institutions, particularly banks that divested aggressively during COVID-19 and are now recognizing they are "grossly undersupplied" in office space. Return-to-office mandates from the Big Banks and provincial government have catalyzed this expansion, with leasing velocity reaching levels unseen in over a decade during Q1 2026.