It's that time of year again and we've got the latest quarterly data in from the GTA's industrial real estate market for Q3 of 2026. See my commentary below and and link to our full report as well.
Full report download here (PDF, 8.40 MB)
The Q3 GTA industrial real estate data appears to show signs of a recovering market, but certain events transpired during the quarter which may throw cold water on those bullish signals and could be a harbinger for more uncertainty, if not slowing activity.
Leasing
The big news for the quarter is that the GTA-wide vacancy rate ticked down once again, this time from 4.2% to 4.0%. For context, there were 11 consecutive quarters over a three-year period from Q3 of 2022 to Q3 of 2025 where the vacancy rate increased quarter over quarter, but since then we have seen four quarters of either flat or declining vacancy. All this to say that after the market achieved its peak in late 2022, it has been on a slow and steady softening track, but the last year has shown signs of recovery. This latest vacancy number continues with that recovery trend.
That all being said, there were three events that occurred during Q3 which made the mood “on the ground” feel disjointed from the bullish data:
Event #1: Trade talks between Canada and the US collapsed on August 22 and have yet to recover. If anything, the trade “war” has only escalated since.
Event #2: The US bond market experienced a significant selloff. Yields began a steady climb on July 3, and that upward trend accelerated sharply on August 25, pushing bond yields to their highest levels in decades.
Event #3: Diesel prices surged. Prices began rising during the week of July 13, accelerated throughout August and September, and peaked at a record high on September 21.
Why are these events relevant? Because each of them is a decidedly bearish factor for industrial leasing.
A trade war with the US weighs directly on the bottom lines of many Canadian businesses. Even those that are not directly affected tend to become more cautious about the economy and more hesitant to make major business decisions, such as committing to a lease on a new building. Higher bond yields drive up borrowing costs across the board. Businesses carry debt and take on new debt for all manner of purposes, and rising yields make that debt more expensive to service. Elevated diesel prices, meanwhile, make virtually everything more expensive. They push up input costs for businesses, eroding margins, while also feeding into broader inflation, which in turn acts as a further drag on the economy.
So while vacancy tightened as a reflection of continued strong leasing activity, the anecdotal feedback is that these broader geopolitical and economic events that occurred during the quarter seemed to trigger a tangible pullback among industrial occupiers who may want to assess things while this uncertainty plays out. Given the time-lag between market sentiment and leasing data, this pullback was not reflected in the latest published data, and it would not be shocking to see the Q4 data emerge in early January with more bearish signals.
The average net asking rate GTA-wide fell for the 9th consecutive quarter, from $16.36 in Q2 of this year to $16.20 this latest quarter. GTA North (comprised mainly of York Region) and GTA West (Mississauga, Brampton, Milton, Oakville) were the submarkets with the highest average net asking rates, at $17.03 and $16.58 respectively, though both markets also saw a drop from their Q2 results. It’s notable that even as the vacancy rate has turned the corner (bullish), the average asking rate continues to fall (bearish), and there are likely a few different reasons that could explain this. One is that asking lease rates often lag actual leasing activity, meaning that as vacancy tightens and landlords gain more leverage, their asking rates may rise but it usually takes a few months for this to bear out. Another factor is that absorption likely has been spurred along in part because asking rates have continued to fall, as landlords re-align their expectations with the realities of the market. Lastly, it may be a matter of the types of spaces that are being absorbed. With more tenant choice, they tend to gravitate toward the higher quality options (newer buildings, better clear height, etc) which tend to have higher asking rates, thus leaving a greater pool of lower quality and less expensive options to make up a greater proportion of the remaining inventory.
Sales
Industrial sales volume dropped off considerably in Q3 versus the previous quarter, from approximately $1.9 billion down to $963 million. That being said, Q2 was an outlier among the last several quarters, with a significant spike in volume relative to what the market had been seeing. At $1.9 billion, Q2 was the highest result by far over the last six quarters. The four quarters before it all ran between $0.8 billion and $1.24 billion, averaging about $1.09 billion. Q3’s $963M is only about 11% below that average. Measured against a typical quarter, Q3 is a little soft but more or less in line with what the market has seen. This confirms the fact that rather than leading to a breakout recovery in sales, Q2 likely benefitted from pent up buyer demand that had sat on the sidelines during the previous 6-12 months when uncertainty was rife and the economy was slowing down, and we’re now reverting back to equilibrium in a sense.
Pricing remained essentially flat at $353 PSF GTA-wide compared to $356 PSF in Q2. Pricing leveled off in mid-2025 after a run up in the 2022-2025 period and has remained remarkably flat ever since, even with sales activity relatively slow. This has been mentioned many times in this corner, but with very little distress in the market, most owners don’t have to sell, and many would rather wait for better conditions than drop their pricing. Fewer willing sellers means fewer transactions, which is helping keep pricing steady even as demand remains soft. For now, the sales market appears to be settling back into the slow but steady pace that has defined it for much of the past two years.
Development
On the development side, the construction pipeline grew slightly in Q3. Space under construction across the GTA rose to approximately 16.2 million SF across 64 buildings, up about 5% from 15.5 million SF in Q2. Nearly all of that growth came from GTA West, where space under construction jumped roughly 12% to 9.7 million SF across 27 buildings. GTA North moved the other way, falling about 8% to 3.5 million SF as projects reached completion, while GTA East and Toronto were essentially flat at 1.2 million SF and 1.8 million SF respectively.
This lines up with what we flagged last quarter, which is that developers are showing renewed interest in land acquisitions and project starts as they look ahead to better market conditions. That said, this is far from a building boom. Most developers remain focused on leasing up in-progress and completed projects, and new starts remain selective and concentrated in the West, where tenant demand has historically been strongest. If the latest bearish macro-economic events eventually subside and occupier confidence resumes (with the way things have gone, neither is assured), a subdued development pipeline should help boost the market and tighten up the supply of available space further while putting upward pressure on rates; to the extent this transpires, it’ll likely be a 2027-2028 story rather than part of the narrative for the remainder of this year.
Looking Ahead
As mentioned, it’s a bit of a tale of two markets at the moment, the one that shows up in the Q3 data and the one that we’re hearing about on the street when speaking with landlords and business owners. Several high-profile global shifts occurred during Q3 just as the market was finding it’s stride again, and which provided if not a “shock” than certainly a “shake-up” to industrial occupiers big and small. Time will tell if the Q4 data shows glimpses of this apparent pull-back.
In any case, the longer-term picture for industrial is likely more positive. It’s reasonable to think that some of the factors that are currently a drag on the economy will shake loose and that some certainty will return, and if that dovetails with the drying up of project deliveries, we may see the vacancy rate tighten further and landlords gain the upper hand in negotiations once again.
For a conversation about your own property requirements, contact Joe Rosati.