The Toronto industrial investment market has experienced meaningful volatility over the past several years, particularly when comparing transaction volumes from the first eleven months of each year.
Industrial sales volumes climbed sharply from approximately $2.3 billion in 2020 to a peak of $7.8 billion in 2023, driven by aggressive pricing, strong investor demand, and rapid development. Since then, activity has moderated, with volumes declining to $3.36 billion in 2024 and sitting at roughly $3.32 billion through November 2025.
This pullback reflects a broader market reset rather than a structural weakness. After several years of accelerated growth, the sector is moving through a normalization phase.
Leasing Activity Improves as Construction Slows
While investment volumes have softened, operating fundamentals in the Greater Toronto Area are beginning to show improvement. During the third quarter of 2025, the industrial market recorded over 1.3 million square feet of positive absorption, alongside a decline in sublease availability an encouraging signal for landlords.
Although a substantial amount of new industrial space delivered earlier in the year, construction starts have now fallen to their lowest level since mid-2020, when pandemic-related shutdowns slowed development across the region. This reduction in new supply should help rebalance the market over the next several years.
As newly completed vacant space is gradually absorbed, net operating incomes are expected to stabilize and recover, supporting asset values. Capitalization rates are also forecast to compress modestly over time, particularly as buyer demand continues to outpace available inventory.
Investor Interest Remains Broad-Based
Much of the new supply delivered in recent years has been built to modern logistics standards, featuring higher clear heights, wider bay spacing, and improved loading capabilities. These upgrades raise the overall quality of Toronto’s industrial inventory and position the market competitively against older industrial hubs that lack modern infrastructure.
Investor sentiment toward industrial real estate remains cautiously optimistic. Approximately $3.3 billion in industrial assets has traded in 2025, involving more than 100 individual buyers, highlighting continued depth in the capital markets.
The three most active purchasers Crestpoint Real Estate Investments, Dream Industrial REIT, and Kingsett Capital collectively accounted for over $900 million, representing nearly one-third of total transaction volume this year. This concentration at the top is balanced by strong participation from a wide range of institutional and private investors.
A notable transaction underscoring continued institutional confidence was the $143 million sale of 11400 Steeles Avenue East, which traded between IG Wealth Management and BGO in September 2025.
Long-Term Fundamentals Remain Intact
While pricing has adjusted downward from peak levels, long-term demand drivers remain compelling particularly in e-commerce, logistics, and distribution. Although manufacturing faces uncertainty due to global trade tensions, most speculative development in the Toronto region has been geared toward logistics users rather than traditional manufacturing tenants.
For investors with a long-term outlook, the current environment may offer attractive entry points, as reduced liquidity and pricing adjustments create opportunities to acquire high-quality industrial assets at more conservative valuations.
