An Overview of the North York Commercial and Industrial Real Estate Market

Updated on April 14, 2020
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Tamara Wilhite is a technical writer, industrial engineer, mother of two, and published sci-fi and horror author.

An Introduction to North York

Toronto is one of the most stable financial business centres in the world. This is contributing to its expanding financial services sector. So did the fact that Canada emerged from the global financial crisis of 2007-2010 relatively unscathed. The city’s growing international prominence will only contribute to the demand for office and industrial space in Toronto.

North York is a located in the central district of Toronto. It is north of Old Toronto, east of Etobicoke and west of Scarborough. It has developed rapidly since the 1970s due to the growth of North York City Centre. It has become the second economic center of the city, rivaling only downtown Toronto. People and businesses that can’t find space in downtown are increasingly unable to find affordable homes or offices in North York, either.

The local construction sector will probably hit its tenth straight year of growth in 2019 as the area struggles to meet demand for real estate. For example, the unemployment rate fell to 6%, the lowest rate since the nineties. The growing population in turn drives demand for services and commercial real estate. Toronto is seeing the largest wave of office construction and redevelopment in a decade and a half. However, supply and demand are unevenly distributed. This creates radically different real estate market conditions across the Greater Toronto Area.

While residential real estate gets the attention of would-be investors as a way to become wealthy, commercial real estate is booming in North York, Toronto.
While residential real estate gets the attention of would-be investors as a way to become wealthy, commercial real estate is booming in North York, Toronto. | Source

The State of Toronto Real Estate

According to The Financial Post, the availability of industrial property across Canada fell to a historic low of 3.9% in 2018. More importantly, that shortage of available industrial real estate won’t ease up any time soon. This is why industrial rents in the city jumped 15% in 2018. Rents could rise that much in 2019, as well, because supply cannot be brought online as fast as businesses want to fill it.

One of the main drivers for increasing rents for industrial properties in the GTA is the lack of land to build on. There isn’t enough land to build new large industrial facilities on. Population growth in Toronto remains strong. This leaves industrial developers competing and losing when someone else buys land to build high-rise condo buildings on. Retrofitting existing buildings or investing in automation to make better use of the space they have is not always an option for industrial and commercial firms, leading many to pay for new facilities that won’t be online for two or more years. Yet many businesses are choosing to build their own facilities for the security it provides.

Industrial tenants find themselves kicked out when the large buildings they’re in are redeveloped for residential use. After all, it is easier to tear down an old warehouse to have lands for townhome construction than ripping out a row of old single family homes. Furthermore, converting old warehouses and commercial space into spacious lofts is a time-honored way of bringing residential units to market. Tearing down the same commercial buildings to get land to build mid-rise condo units is straightforward, too, since you aren’t evicting existing residents to build better, denser housing stock.

Because money is cheap due to low interest rates and the valuation of both land and industrial buildings are going up, there has been a spike in new industrial construction. It is seen as a wise investment, since the building will appreciate at around 10% a year and it protects the firm from double digit increases in their rental rates.

All of this explains why construction activity in Toronto increased 47% in 2018. The biggest problem for Toronto businesses is the lack of suitable sites where they want or need to be. The ideal locations are close to city highways and near population centers. Around eight million square feet of industrial space is under construction across the Greater Toronto Area. Industry experts say all of this could be absorbed by the market due to demand. In fact, of the roughly 7.3 million square feet of new space being developed downtown has already been pre-leased as of the end of 2018.

The State of North York Commercial Real Estate

More than three million square feet of industrial space in the Greater Toronto Area was absorbed in the last quarter of 2018. Three quarters of this is occurring in GTA West markets like Milton, Mississauga and Brampton. Yet demand is high across the entire Toronto metropolitan area.

The Greater Toronto Area Central market—including North York—has the lowest industrial availability area of the GTA at just 0.8%. This explains why asking net rents in North York passed seven dollars per square foot. Industrial rental rates increased 23% on an annually compound basis between 2016 and 2018. For comparison, rental growth between 2014 and 2016 was only 0.8%.

North York’s industrial inventory was nearly 73 million square feet of space at the end of 2018. Around 900,000 square feet of new industrial space was under construction at that point, though nothing was completed in the fourth quarter of 2018. Leasing activity was more than two million square feet of industrial space. The overall availability rate of industrial space in North York was 1.2% at the close of 2018.

The Future of the North York Real Estate Market

Toronto is the most constrained industrial market in North America. The overall market has only 2.2% availability. Vancouver came in second at 2.4%. Why is industrial real estate demand soaring? It is mostly due to greater need for warehousing, food distribution and ecommerce space. And the ideal location for these facilities is in North York due to transportation routes like Highway 400, Highway 401, Highway 404 and the Don Valley Parkway. In fact, the section of Highway 401 that passes through North York is the busiest section of highway in North America.

The vacancy rate for office space in Toronto fell to 3% in 2018. Demand for downtown office space is getting tight because demand remains high due to stronger leasing from the technology industry and strong job market overall. Technology companies accounted for 30% of industrial and commercial space users in 2018. Co-working firms are a new competitor in this market, and they’re notable for leasing any large space that hits the market. This increases demand for industrial spaces of all sizes. There is new real estate space that’s under construction, but that won’t be completed until 2021.

All of this suggests that the valuations and rental rates for commercial and industrial real estate in North York will continue to grow at low double digit rates through 2021 and likely for years to come.


“GTA industrial rents up 15 per cent in 2018, headed higher”, Real Estate News Exchange, Jan. 21, 2019
“It's not just condos — Toronto is also running out of commercial real estate”; The Financial Post, July 17, 2018
“Markets to watch in 2019”; PriceWaterhouseCoopers, April 12, 2019
“Toronto Industrial Snapshot”; Cushman and Wakefield; April 11, 2019
“2019 Canadian Real Estate Market Outlook”; CBRE, February 26, 2019

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2019 Tamara Wilhite


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