“Beware of little expenses; a small leak will sink a great ship.”
— Benjamin Franklin
Welcome to this week’s edition of Toronto Industrial Intel. Last week we made the case that 2026 is the best leasing market for occupiers in years, with net rents down roughly 9% from peak. That is true and it is also only half the story. While the rent line has fallen, the costs sitting around it have been climbing quietly and steadily. For owner-occupiers in particular, those costs land directly on the books, and they are quietly eroding the savings the softer market appears to offer. This week, we add up the other side of the ledger.
Insurance: The Premium That Rises Even When Nothing Happens
Many occupiers are surprised to see premiums climb despite a clean claims history. The driver is replacement-cost inflation. Commercial replacement values have risen more than 60% since 2019, tracking the same construction-cost surge that has reshaped every other part of the build environment. Because property insurance is priced against what it would cost to rebuild not what you paid your premium can rise even as your building sits unchanged. Construction type, total insured value and your five-year loss history all feed the number. The lever occupiers can pull is diligence: keep replacement-cost valuations current and realistic, manage deductibles deliberately, and protect a clean loss record, because it remains a direct pricing input.
Property Taxes: The Cost Hiding in an Outdated Assessment
We return to a theme we have raised before because it keeps costing occupiers money. Ontario’s assessments still rest on 2016 market values, yet the assessed value sitting in the business class has continued to grow. The result is a system that is easy to overpay into and easy to miss the deadlines on. Owners and occupiers who treat their assessment as fixed leave money on the table; those who review it, benchmark it and appeal where warranted often find the single largest controllable line in their occupancy cost. If you have never tested your assessment, that is the first leak to check.
Compliance Creep: When Regulation Moves Onto Your Books
The clearest recent example is Ontario’s 2026 storage-racking rules, which we covered earlier this year. What was once an engineering detail has become an executive-level compliance obligation, with real inspection, documentation and remediation costs attached — costs that fall on the occupier. It is part of a broader pattern of regulatory expense migrating onto tenants’ ledgers. Rooftop solar arrangements are another: the promise of energy savings can mask significant obligations around roof maintenance and replacement, and tenants who do not read those clauses carefully can inherit a liability they never priced in.
Energy and Operating Costs: The Line That Moves With the World
Operating costs electricity, natural gas, water have become less predictable and, for heavy-power users, materially larger. As we have discussed in our coverage of heavy-powered warehouses and data-centre demand, the facilities driving the next wave of industrial use are power-hungry by design. For occupiers running automation, refrigeration or high-throughput operations, energy is no longer a rounding error in the operating budget; it is a variable worth modelling explicitly before signing.
The Real Number
Put it together and the lesson is simple: the cheapest face rent is not always the cheapest building. The figure that matters is total cost of occupancy — rent plus taxes, insurance, compliance, energy and maintenance over the full term. A building with a low headline rate but an aggressive assessment, an aging roof and heavy power demands can cost more to occupy than a slightly pricier, better-run alternative. In a market where the rent line is finally working in occupiers’ favour, the discipline that protects those savings is refusing to stop the analysis at the rent.
Small leaks sink great ships. The occupiers who come out ahead this year will be the ones who account for every one of them
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.
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
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.
