In our first newsletter, we set the stage with the GTA’s position on the North American industrial landscape—its scale, its vacancy trajectory, and where rents stand after seven quarters of decline. Now it’s time to look under the hood. This installment examines the demand dynamics shaping the market: how preleasing has shifted, where vacancy is concentrating by building size and by region, what’s happening with sublease space, and which tenant segments are driving leasing activity. The picture that emerges is one of a market in transition—still fundamentally sound, but navigating a very different environment than the one that defined 2020–2022.

The Preleasing Pullback

Changing the LandscapeOne of the clearest signals of shifting market dynamics is the decline in preleasing activity on new developments. During the boom years, developers routinely secured tenants for 60–80% of new product before it was even built. Those days are behind us. Q4 2025 preleasing rebounded to 35.1% from the yearly average of 29.1%—a welcome improvement but still well below the levels recorded in 2022, 2023, and 2024.

What does that mean in practice? More product is hitting the market unleased, and that directly amplifies vacancy rates. It’s a fundamental change in the risk profile for speculative development. Developers who once enjoyed the luxury of signing tenants well before shovels hit the ground are now competing for those tenants in an environment where options have multiplied.

Lower Preleasing Amplifies Vacancy—Especially in Growth Markets

The relationship between falling preleasing rates and rising vacancy is playing out differently across the GTA’s four major submarkets. Markets that saw the most aggressive construction activity are experiencing the steepest vacancy climbs:

GTA East stands out as the most dramatic case—from a vacancy rate of just 0.3% in 2022 to 7.3% today, a 7.0 percentage point swing that reflects both the scale of new supply delivered and the lower preleasing rates on that product. GTA West followed a similar trajectory, jumping from 1.1% to 6.0%. GTA Central and GTA North, while also seeing increases, have been somewhat more insulated due to tighter land constraints and a more established tenant base.

Vacancy Rising Across All Size Segments

The market rebalancing isn’t confined to one building type—vacancy rates are climbing across all size segments. The most notable increases are at both the lower and higher ends of the scale:

The 200K+ SF segment is seeing the highest vacancy at 6.7%, driven by the wave of large-format speculative warehouses that developers rushed to build during the logistics boom. At the other end, the sub-20K SF segment’s 5.9% vacancy is notable because this has historically been the tightest part of the market. The 100K–200K SF range remains the tightest at just 2.5%, suggesting that mid-large tenants are still actively absorbing quality product in this segment.

Fastest Growing Markets Face the Steepest Vacancy Climb

The data makes it clear: the submarkets that added the most inventory since 2022 are the same ones facing the sharpest vacancy increases.

GTA West delivered a staggering 26.5 MSF of new supply since Q4 2022—representing 16.2% of its total inventory. GTA East, while adding a smaller absolute number (9.2 MSF), saw that represent 6.6% of its base, which—combined with lower preleasing—translated into the largest vacancy jump at 7.0 percentage points. GTA Central, constrained by land availability and a mature built-out footprint, added only 3.5 MSF (1.5% of inventory), and its vacancy increase of 2.7 percentage points was the most modest. 

Small to Mid-Sized Users: The Backbone of Market Activity

Despite the headlines about big-box vacancies and shifting demand patterns, small to mid-sized tenants remain the engine that drives the GTA’s industrial leasing market. In 2025, 81.1% of all transactions fell in the under-50,000 SF range—consistent with previous years and a reminder that the GTA’s industrial economy is powered by hundreds of small businesses, not just a handful of logistics giants.

Total leasing volume hit 28.0 MSF in 2025—up significantly from 20.7 MSF in 2024 and approaching the 30.3 MSF peak recorded in 2021. The number of transactions (531) dipped slightly from 2024’s 599, suggesting larger average deal sizes

Top-End Deals Are Back in the Mix

One of the more encouraging developments in 2025 was the return of large-block leasing. The contribution of 100,000 SF+ deals to total new leasing rebounded to 49.6% in 2025 (17.3% in the 100K–200K range plus 32.3% in the 200K+ range), up sharply from just 35.1% in 2024 and approaching the 50%+ levels recorded in 2022 and 2023.

This is significant. Large-block absorption is the key to working through the current oversupply of big-box warehouses, and the 2025 data suggests that large tenants whether logistics operators, 3PLs, or manufacturers—are re-entering the market after sitting on the sidelines for much of 2024.

Sublet Space Remains Elevated

The sublease market continues to be a wildcard. Total sublease availability stood at 6.2 MSF at the end of Q4 2025—a level that has remained stubbornly elevated. When combined with direct and for-sale availability, total available space reached approximately 42 MSF, the highest level in nearly a decade.

Average asking lease rates sit at $16.57 PSF net across all product types. The persistent sublease inventory is adding competitive pressure to the direct leasing market, giving tenants more options and more leverage at the negotiating table. For landlords, this means that simply listing space is no longer enough—competitive pricing, flexible terms, and tenant improvement allowances are increasingly becoming the cost of doing business.

Coming Up: Newsletter 3—Outlook and GTA Central Spotlight

Our final installment will tackle the forward-looking picture: Where are rents headed? How much new supply is still in the pipeline? When might vacancy stabilize? We’ll also provide a detailed GTA Central submarket spotlight—complete with stats, significant deals, and available buildings over 100,000 SF.

If you’re a tenant looking to capitalize on current conditions, or a landlord navigating the new competitive landscape, reach out, I’d be happy to discuss how these trends translate to your specific situation.

For a confidential consultation or a complimentary opinion of value of your property please give us a call.

Until next week…

Goran Brelih and his team have been servicing Investors and Occupiers of Industrial properties in Toronto Central and Toronto North markets for the past 30 years.

Goran Brelih is an Executive Vice President for Cushman & Wakefield ULC in the Greater Toronto Area.

Over the past 30 years, he has been involved in the lease or sale of approximately 25.7 million square feet of industrial space, valued in excess of $1.6 billion dollars while averaging between 40 and 50 transactions per year and achieving the highest level of sales, from the President’s Round Table to Top Ten in GTA and the National Top Ten.

Specialties:
Industrial Real Estate Sales and Leasing, Investment Sales, Design-Build and Land Development

About Cushman & Wakefield ULC.
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 53,000 employees in 400 offices and 60 countries.

In 2020, the firm had revenue of $7.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com.

For more information on GTA Industrial Real Estate Market or to discuss how they can assist you with your real estate needs please contact Goran at 416-756-5456, email at goran.brelih@cushwake.com, or visit www.goranbrelih.com.

Connect with Me Here! – Goran Brelih’s Linkedin Profile: https://ca.linkedin.com/in/goranbrelih