GTA Industrial Vacancy Rates Shift as Market Conditions Change

📅 5 days ago

The industrial real estate landscape in the Greater Toronto Area is experiencing a significant shift as vacancy rates decrease and rental prices stabilize, marking a notable change in tenant dynamics.

For nearly two years, tenants with expiring industrial leases in the Greater Toronto Area (GTA) found that the most prudent strategy was to remain inactive. Each quarter brought an increase in available space, a decrease in rental prices, and landlords who were more amenable to negotiations than their predecessors. However, this trend has now shifted. According to market research conducted by Colliers, the industrial vacancy rate in the GTA has seen a decline for two consecutive quarters, marking a significant turning point in the market. The era of waiting for even lower prices appears to be at an end.
In an extensive review of all quarterly market reports issued by Colliers' Toronto industrial research team over the past five years—22 reports from Q1 2021 to Q2 2026—I examined the trajectory of vacancy rates, identifying how they became so constrained, the correction process, and the precise moment when this trend reversed. The data reveals that GTA industrial vacancy rates reached a low of approximately 0.2% in mid-2022. Following this, there was a steady increase over the next three years, peaking at 2.9% during the third and fourth quarters of 2025. However, this figure has since dropped to 2.5% in Q1 2026 and further down to 2.2% in Q2 2026.
Rents reflect a similar narrative from an alternate perspective. At the start of 2021, the net asking rent for industrial space in the GTA was $10.54 per square foot, but this figure nearly doubled by Q3 2023, reaching $18.57. This rapid increase encapsulates a boom that unfolded over a period of just two and a half years. The wave of new supply that began construction during this growth phase has finally begun to impact the market, resulting in a consistent decrease in rents, which have fallen to $16.22 per square foot by Q2 2026, representing a correction of approximately 13% from the peak.
Colliers categorizes the GTA into four submarkets: Central, East, North, and West. The West market, which encompasses Peel Region and Halton, boasts the largest inventory. This submarket has experienced more pronounced shifts than the overall GTA, with vacancy rates peaking at 3.3% in Q3 2025—0.4 points above the GTA-wide peak. Since then, vacancy rates in the West have decreased for three consecutive quarters, currently sitting at 2.3%. The Q2 2026 report from Colliers highlights the West market as the leading contributor to this quarter's positive performance, with nearly 2 million square feet of absorption and vacant space dropping to its lowest level since Q3 2024.
For those who have been delaying decisions regarding lease renewals, the current market conditions present a challenging reality. The favorable conditions that allowed tenants to exert significant leverage over landlords are beginning to diminish, with Peel Region leading this shift rather than trailing behind it. In weekly meetings, Colliers' Toronto industrial brokers discuss completed deals, and for the first time in three years, there are reports of agreements being finalized with only half to a full month of free rent offered before full rent payments commence. Such minimal concessions would have been unthinkable in the competitive market of 2024 or 2025, where landlords faced an abundance of competing space. Now, this level of negotiation is met with indifference, indicating an acceptance of the new market reality.
Despite these changes, it is important to note that the leverage has not completely reversed overnight. Rents remain significantly lower than their peak values, and a few quarters of improvement do not erase the three-year correction faced by the market. For tenants contemplating whether to secure a lease now or wait for potentially better terms next quarter, the calculations have shifted. The most advantageous period for GTA industrial tenants likely occurred in the twelve months leading up to now, suggesting that the window for favorable lease conditions may be closing rapidly.

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