The Greater Toronto Area industrial market rebounded in the third quarter, says Newmark’s head of Canadian research.

Although vacancy across the region remained elevated, leasing activity returned to historical levels, said Andrew Petrozzi, the report’s author, in an interview with Connect.

“It’s interesting just what a single quarter can do,” said Petrozzi. “We have seen the Toronto market starting to bend its way back more towards where it has historically been.”

The market that is still adjusting after the post-pandemic surge and, although it will not return to those levels for quite some time, it is starting to find stabilization, he added. Vacancy rose 20 basis points year-over-year to 3.2% but, essentially, remained flat quarter-over-quarter, pointing to a a slower but more stable leasing environment.

Petrozzi attributed the yearly rise in vacancy to an increase in new large-warehouse supply. As the market continues towards stabilization, a flight to quality is emerging.

“Large users are interested in new space,” he said.

Ample industrial-land supply allows tenants to utilize large floorplates offered in new-construction projects.

“So, there is some of that space that can be absorbed, which is why you’re seeing vacancy right now hover around 3.2%,” said Petrozzi. “It’s been basically around 3%-3.2% for about a year now.”

Submarket vacancy levels varied significantly across the GTA. Halton recorded the highest industrial vacancy at 7.7%, followed by Durham at 5%. York remained the tightest market at 1.8%, while Toronto posted a 2.6% vacancy rate and Peel stood at 2.9%.

“York Region [absorption] has remained positive all year long,” said Petrozzi. “Tenants are very interested in York Region, or GTA North. “It has the lowest vacancy, sub-2%, so far through the first nine months of the year. It had almost 1.7 million square feet of absorption just itself. York Region is where tenants seem to want to be.”

Leasing activity has also picked up in Peel Region, which is the largest submarket in GTA West, after taking a hit in the second quarter. Peel also posted one of the lowest vacancy rates (2.9%), contrasting with typical swings for which the area is known.

“We’ve also seen a real uptick in the Durham Region, or GTA East,” said Petrozzi. “Typically, it’s one of the smaller markets, but it’s also one of the least expensive markets in the GTA. Rents there are notably less than you’ll find anywhere else in the GTA.

Rent differentiation among the submarkets is impacting tenant decisions, as occupiers are seeking lower rents, and one of the places they can find them is Durham.”

Leasing velocity improved during the quarter as many occupiers moved ahead with space decisions despite ongoing economic uncertainty linked to potential U.S. tariff impacts. The uncertainty is being superseded by tenants’ need to make business decisions and move forward, said Petrozzi.

Sublease availability declined by about 25% from its mid-2025 peak, but more than 5.6 million square feet remained available, largely concentrated in Peel Region. Competitive sublease space continued to put downward pressure on effective headlease rates, contributing to widening rent differences among submarkets as tenants prioritized affordability.

Construction activity continued to rise in the third quarter, with more than 11.4 msf of industrial space under construction across the GTA . That total was up from 9.8 million square feet a year earlier and higher than the previous quarter, adding to longer-term vacancy pressures.

Although new construction is coming forward, the emphasis is switching to design-builds as opposed to speculative projects, said Petrozzi.

Industrial investment activity remained muted. GTA industrial asset sales totalled about $4.1 billion through the third quarter of 2025, matching the same period in 2024 and representing the weakest nine-month total since 2020, as investors remained cautious despite the signs of improving leasing momentum.

As 2025 ends and 2026 begins, the “fair bit” of sublease space availability, and that will slowly need to be absorbed.

“That will likely continue to happen if we continue to see the activity levels that we’ve seen in Q3 through Q4, and some of the earlier numbers are saying that we are continuing to see that activity,” said Petrozzi. “So there will be some opportunities for tenants in virtually all markets. That’s Peel, Toronto, York, Halton and Durham. That overall space sublease availability will likely start to come down.”

Although rents continue to soft, they are proceeding towards a plateau, and the flight to quality will remain a factor.

Pictured: Greater Toronto Area industrial property.

Photo: Courtesy of Newmark/