GTA Industrial is mid-cycle in a supply-led correction — availability will keep climbing through 2024, rent growth has effectively stalled at ~$18.60/psf, and the 14.5 msf speculative pipeline guarantees the pain extends into 2025. We are bearish on near-term fundamentals, constructive on capital values.

Interest rates

GTA industrial weighted average net asking rent climbed to $18.60 psf in Q1 2024, a modest $0.17 quarter-over-quarter and roughly 4% year-over-year increase that Cushman & Wakefield characterized as a shift toward more sustainable growth versus the 22.3% five-year YOY average. Submarket dispersion remains wide, with GTA North leading at $19.18 psf and Hamilton trailing at $12.47 psf. Brokers also flagged sublet space averaging roughly $14.03 psf as increasingly competitive against direct offerings.

Vacancy

Overall vacancy rose to 3.2% (+60 bps QoQ, +210 bps YoY) per Cushman & Wakefield, while Colliers reported a tighter 1.8% Toronto industrial vacancy and CBRE tracked availability at 3.1% — a gap that reflects different methodologies more than disagreement on direction. C&W called the 3.2% reading a seven-year peak and attributed 76.7% of the new vacancy to small-bay space. GTA West led submarkets at 4.1%, followed by GTA East at 3.8%, while Hamilton remained tightest at 1.2%.

Demand

Net absorption was negative 1.52 million sf in Q1 2024, the fourth consecutive negative quarter and a sharp deterioration from -374,000 sf in Q4 2023. GTA West drove the loss at -1.1 million sf, with GTA Central also contributing -458,000 sf; GTA North was the only submarket in positive territory at +154,000 sf. Cushman & Wakefield noted overall new leasing activity totaled roughly 4.0 msf, a 1.8 msf contraction versus the five-year quarterly average, with notable new leases signed by Resource Label Group (132,176 sf in Scarborough), Stallion Express (126,184 sf in Mississauga) and HPG (112,865 sf in Milton).

Supply

The GTA delivered 3.23 million sf of new supply in Q1 2024, but only 28.9% was preleased — the lowest share since 2016 per Cushman & Wakefield. Under-construction inventory declined to 15.75 million sf (-1.0 million sf QoQ), of which 14.5 million sf (91.9%) is speculative. Notable completions include Oxford Properties' 1.09 msf building at 10725 Louis St Laurent Avenue in Milton, Carttera's 252,000 sf at 3100 Mainway in Burlington, and QuadReal's 158,000 sf at 60 Birmingham in Etobicoke — all delivered vacant. GTA West holds the bulk of the pipeline at 6.6 msf, followed by GTA North at 4.0 msf and GTA East at 4.0 msf.

Cap rates

Class A GTA industrial cap rates moved up 25 bps QoQ to 5.25% (range 5.00%–5.50%), with CBRE separately marking Toronto Class A at 5.00%–5.50% and Class B at 5.25%–6.00%, both edging higher on the quarter. Avison Young's national survey put new single-tenant Toronto industrial at 5.75% and mature multi-tenant at 6.20%. Industrial investment volume fell to $1.1B, down from $2.3B in Q4 2023 and $3.5B in Q1 2023 (-69% YoY); Avison Young attributed the slowdown partly to stakeholders delaying deals in anticipation of rate cuts. Notable trades included Concert Properties' acquisition of 2340 Winston Park in Oakville (202,165 sf at $331.91 psf) and Brookfield's purchase of 2385 Meadowpine in Mississauga (130,336 sf at $342 psf).