GTA commercial real estate market at a crossroads amid continuing headwinds

Commercial real estate investors in the Greater Toronto Area (GTA) saw mixed fortunes in Q3 2025, as optimism about improving debt markets clashed with persistent economic uncertainty and a market still stuck in a holding pattern.

Avison Young’s latest GTA investment review showed total investment volume reached $2.9 billion for the quarter. That's a 6% increase from Q2, but still 6% below the same period last year.

“Potential buyers continue looking for opportunities and are still optimistic that circumstances will improve, but the market remained in a holding pattern longer than had been expected, as stakeholders wait to see how ongoing economic uncertainty will resolve,” the report said.

Industrial assets dominated the landscape, accounting for 51% of all transactions and nearly $1.5 billion in sales—a 22% jump quarter-over-quarter and 27% year-over-year.

The largest deal involved a $152.5 million self-storage portfolio spanning Mississauga, Ajax, and Toronto.

“The industrial sector remains the GTA’s most-traded asset class, with investment volume restrained more by a scarcity of good-quality assets available for sale than by any lack of buyer demand,” Avison Young said.

However, ongoing tariff uncertainty and challenges in the auto sector continued to weigh on sentiment.

Multi-residential investment, by contrast, fell 14% from Q2 and 62% from Q3 2024, when large portfolio sales had buoyed results.

Still, demand for both value-add and stabilized assets remained strong, with improved financing conditions spurring buyer activity.

“Multi-residential assets remain resilient amid the uncertainty impacting the commercial real estate industry as a whole,” the report said.

Retail assets saw a resurgence, with $420 million in deals. That's up 49% year-over-year.

Investors gravitated toward necessity-based tenancies, such as grocery-anchored strip malls, which are seen as more likely to weather economic turbulence.

“Competition among private buyers has been lively, particularly for smaller assets,” Avison Young said.

ICI land sales surged 64% year-over-year to $366 million, but the sector still trailed 2024’s pace overall.

Office investment remained the laggard, down 28% year-over-year, though improved leasing activity and urgency among large corporate tenants offered some hope for the sector’s outlook.

Broader trends included a disciplined approach by investors, who are “extremely disciplined in their analysis and evaluation of potential opportunities as circumstances improve.”

While two consecutive Bank of Canada rate cuts have made debt markets more attractive, the expiry of five-year mortgages from 2020–21 may bring more assets to market in late 2025 and 2026.

GTA commercial real estate investors are cautiously optimistic, with industrial and retail assets leading the way.

While improved debt markets offer hope, persistent uncertainty and a disciplined investment approach are likely to keep transaction volumes below historical norms in the near term.

Source: Canadian Mortgage Professional