Managing a Softer Industrial Market: Strategies for Landlords to Attract Quality Tenants

In the Greater Toronto Area’s industrial real estate market, 2025 has brought a noticeable shift toward tenant-friendly conditions.

With availability rates climbing to around 5.0% in Q2 and projected to increase further by year-end, negative absorption, longer lease-up timelines, and a residual oversupply outpacing demand, landlords are increasingly motivated to compete for quality occupants. Average net asking rents are also moderating, expected to dip further from a $17.00 PSF net average in Q2, prompting owners to offer flexible terms to fill spaces quickly.

This softening—driven by economic uncertainties like U.S. tariffs and overall economic weakening —has opened doors for tenants to secure concessions that were scarce during the post-pandemic boom.

For industrial tenants, this environment presents a prime opportunity to negotiate incentives like free rent periods, rent reductions, and tenant improvement allowances (TIs) that improve operating cashflow and cost predictability.

On the flipside, however, these dynamics put Landlords on their heels trying to lease up vacant space while looking to attract and retain high-quality, creditworthy tenants.

That’s why, in this week’s issue, we’ll explore how to strategically position assets to reduce lease-up times and minimize periods of vacancy.

Key Inducements and Their Value in Today’s Market

Below are some core tenant inducements, plus emerging ones gaining traction. While we covered key incentives previously, for this week’s issue, we want to reframe and view similar concepts from a Landlord’s perspective.

• Free Rent Periods (Rent Abatement): These offer 1-6 months of base rent relief at the lease outset, directly offsetting setup costs like relocation or inventory ramp-up. In higher-vacancy submarkets, landlords are granting 3-6 months (in some cases up to 1 year) to lock in 5-10 year commitments, especially for speculative builds with low pre-leasing (down to 16.4%). That said, Landlords should look to place any abatement periods outside of the lease term, positioned as early occupancy or fixturing, and should still ensure the Tenant covers additional rent and utilities.
• Avoiding Rent Reductions: Instead of reducing face rents, provide turnkey spaces with landlord-funded improvements. This preserves rental rates while making properties move-in ready, appealing to tenants seeking minimal upfront costs. Turnkey solutions can differentiate your property in competitive markets, maintaining asset value and attracting high-quality tenants.

• Tenant Improvement Allowances (TIs): Fund specialized upgrades like high-bay lighting, EV charging stations, or racking systems to reduce tenant startup costs. For example, offering $5 PSF on a 100,000 sq. ft. space equates to $500,000, often delivered turnkey to streamline the process. Combine warehouse upgrades with office build-out allowances to create fully equipped facilities, increasing tenant appeal without lowering face rates. Amortize some costs into base rent to balance investment while preserving property value. Overall, try to align improvements with general-purpose building upgrades which add value beyond the initial term.
• Blend-and-Extend Options: For existing tenants, blending current and extended lease terms averages out rents, discouraging subleasing. This stabilizes occupancy and appeals to risk-averse tenants like third-party logistics providers. Offer this proactively to tenants nearing lease expirations to secure renewals early.
• Flexible Lease Terms: Short-term leases (1-2 years) with renewal options reduces tenant risk perception and accelerates leasing velocity. Include clear renewal rate escalations to protect against future rent softening.
• Escalation Caps and Renewal Options: Tenants may try to cap annual rent escalations and negotiate favourable renewal rights given the market’s softness. That said, be careful of making long-term commitments or giving up rights as markets will inevitably recover. Creative structuring can be done to provide incentives/relief in the near-term while reserving the ability to increase rents or recover more expenses when the market shifts towards Landlords.
• Expansion Rights and Flexibility Clauses: Giving priority access to adjacent space (right of first refusal/offer) or subletting/assignment rights without penalties can be appealing to Tenants but can encumber a property and add a layer of risk to the Landlord.

These inducements are some of the key levers Landlords and Tenants will pull in order to negotiate favourable terms when working through a potential lease. Landlords should be cautious of making over-commitments in softer economic times which may stay in place beyond a market recovery.

Actionable Strategies for Successful Lease-Up

To manage risk during this tenant-favourable window, approach negotiations with preparation and leverage. Here are some strategies to help get space leased quickly:

• Invest in Targeted Property Upgrades: Improve older properties with high-demand features like LED lighting, EV charging stations, office buildouts, and even cost-effective improvements such as white-boxing, polished floors, and inviting entrances.
• Amplify Digital Marketing and Outreach: Develop high-quality virtual tours and detailed listings on platforms like LoopNet, CREXi, and LinkedIn, emphasizing unique features. With 4.9 million square feet of new deliveries in 2025, targeted digital campaigns can differentiate your property. Partner with local brokers to leverage their networks, their submarket-specific data and expertise, and their ability to convert interested Parties into Tenants.

• Screen for Creditworthy Tenants: Conduct thorough financial reviews and background checks to secure stable tenants over speculative startups. With sublease availability up tremendously, be cautious of potential Tenants’ use and overall industry health.
• Leverage Data-Driven Market Intelligence: Monitor submarket trends to dynamically adjust pricing and concessions to stay competitive. Regularly consult with local brokers to anticipate shifts while maximizing collected revenues.
• Explore Alternative Uses and Optimize Space Utilization: Convert underutilized spaces into flex warehousing, demise larger spaces into sought-after mid-bay units, or convert properties into industrial condos, if feasible. Flexibility can go a long way when Tenants have options.
• Proactively Engage Economic Development Agencies: Partner with GTA municipal economic development offices or organizations like Toronto Global to attract growing industries, such as life sciences or advanced manufacturing. These agencies can connect you with tenants seeking incentives or strategic locations.
• Offer Turnkey Leasing Packages: Providing a turnkey space helps to reduce startups costs and time to operation for prospective Tenants. Landlords may wish to strike a balance between complete speculative build-out and shell condition; sometimes adding in bathrooms while having permits ready to do a design-build office custom to a particular Tenant’s needs.

By focusing on these strategies, industrial Landlords can turn the GTA’s current challenges into advantages, securing quality Tenants and leasing up space as the market continues to recover.

With availability expected to further increase before potential stabilization, Landlords should remain flexible and agile. Depending on the submarket and the condition of any asset in question, the above strategies can help induce companies to become long-term Tenants. For personalized advice tailored to your needs, reach out to see how our team can assist.

Conclusion

In the GTA’s softening industrial market, landlords must act decisively to lease up vacancies and attract quality tenants.

With availability at 5.0% and rents dipping to $17.00 per square foot, strategic inducements like rent abatements and flexible terms paired with targeted upgrades can differentiate properties in a tenant-favorable landscape.

These proactive measures not only address immediate vacancies but position portfolios for resilience as demand is projected to rebound starting in 2026. 

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