Market Report
Toronto Industrial Market Report
2025 Investment Forecast
Industrial Outlook Turning More Positive
With Market Recalibration in Full Swing
Sector participants adjusting to an evolving landscape. Toronto’s industrial properties experienced a rapid change in market conditions last year. As demand softened, many tenants took advantage of rising vacancy rates and slower rent growth to upgrade to higher-quality spaces. At the same time, landlords became more inclined to offer inducement packages, such as rent-free periods and tenant improvement allowances, instead of reducing asking rents. Although leasing activity for larger-bay properties remained healthy, landlords were also open to dividing large facilities into smaller units for multiple tenants as a way to accommodate evolving demand dynamics. This trend is expected to continue into 2025 but could moderate as demand strengthens – likely in the latter part of the year, when less restrictive interest rates are absorbed by the broader economy. Complementing this outlook, construction activity is expected to slow further, as developers adopt a cautious wait-and-see approach amid cooling pre-leasing activity. Ergo, while the vacancy rate is projected to increase for another year, lower interest rates and a slower pace of inventory expansion will help cap the upwards movement.
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