In the second quarter of 2024, the Greater Toronto Area (GTA) industrial vacancy rates increased from 1.4 percent to 2.1 percent, approaching levels last seen in the fourth quarter of 2018. Vacancy rates are projected to continue rising over the coming quarters. Availability rates also surged from 2.8 percent to 3.7 percent. The average net rate has started to decline quarter-over-quarter, now standing at $18.11 per square foot.
In the second quarter, new supply of 2.5 million square feet was delivered. As the availabilities rise, numerous national developers are pausing their plans to start new construction. Discrepancies between tenant and landlord expectations persist and widen, with tenants feeling the current market rents and their escalations are not indicative of market conditions. Occupiers are finding this to be the right time to make their real estate decisions, creating pressure on some landlords to be more creative in their offerings. All signs point to a potential shift from an entirely landlord-centric market to a more balanced one. However, for the market to become tenant-favorable, vacancy and availability rates need to be at a higher level.
Looking ahead, the market is expected to remain challenging but still hold significant opportunities. The Bank of Canada recently reduced interest rates, however, it remains to be seen if this will result in more activity. The current flux can be used as an advantage by the occupiers to negotiate better terms.
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