Q2 2025 Land Market Report
Market Overview
The Greater Toronto Area and Greater Golden Horseshoe commercial real estate markets are navigating a period of significant adjustment as we move through 2025. Operating within a high-rate environment, compounded by emerging tariff pressures and broader economic uncertainty, both industrial and residential land markets have experienced notable contractions from their 2022 peaks. While transactional volumes have declined substantially, the fundamentals underlying these markets remain sound, with well-located assets continuing to attract targeted investor interest from those positioning for the next market cycle.
ICI Land Market
The ICI land sector has witnessed a dramatic transformation since reaching historic highs in 2022. GTA land sales volumes have contracted from nearly $1.6 billion in Q2 2022 to approximately $400 million in Q2 2025, with the Greater Golden Horseshoe following a similar trajectory despite brief recovery attempts in mid-2024. This pullback reflects a perfect storm of investor caution, elevated holding costs, and increasingly restrictive financing conditions.
Ontario's industrial real estate landscape is experiencing a fundamental rebalancing after years of unprecedented tightness. Vacancy rates have climbed to 3.1%, with availability reaching 4.3%, creating the most tenant-favorable conditions we've seen in years.
Asking rents have moderated from their $19 per square foot peak to $16.86 per square foot, while the GTA Industrial market shows particular stress with availability hitting 8.1% and logistics properties experiencing the highest vacancy rates among all industrial property types.
Despite these headwinds, the market is showing signs of stabilization rather than outright distress. The absence of widespread financial distress, combined with sustained interest in strategically located parcels, suggests we're witnessing a healthy recalibration that may present compelling entry opportunities for long-term investors.
Residential Land Market
The residential development landscape continues to face significant headwinds, with new condo sales down 93% compared to the 10-year average in May 2025. The market is grappling with 78 months of unsold new condo inventory, while residential land sales in the GTA have declined 51% year-over-year. Despite government pro-supply policy initiatives, the development engine remains stalled due to insufficient sales revenue rather than regulatory barriers.
Transaction volumes and values across both the GTA and GGH have declined steadily since early 2022, with only occasional brief rebounds. New home benchmark prices, particularly for low-rise properties, remain elevated despite softening from 2022 peaks.
A significant wave of construction completions scheduled for 2025, driven by projects currently under development, threatens to add further pressure to an already oversupplied apartment sector.
Monthly new home sales continue to hover near historic lows, with buyer activity remaining subdued across all property types. However, detached home sales volumes are showing tentative signs of revival heading into late 2025, providing a glimmer of optimism for the single-family segment. For investors focused on long-term fundamentals, current conditions may present strategic acquisition opportunities, particularly in well-located detached inventory showing early recovery signals
Economic Context & Challenges
Trade tensions with the United States represent the primary market headwind, as the implementation of 25% tariffs on Canadian imports (excluding oil and energy) has created a "pens-down" investment approach across the sector.
The automotive manufacturing sector has been particularly affected, exemplified by Stellantis laying off approximately 4,500 workers at its Windsor facility. Adding to future cost pressures, property owners are bracing for a potential 235% surge in industrial property values since the last MPAC assessment in 2016.
However, the provincial government has responded with comprehensive support measures. The $40 million Trade-Impacted Communities Program, coupled with the $5 billion Protecting Ontario Account emergency fund, provides crucial business continuity support. Enhanced manufacturing investment tax credits, increased from 10% to 15% for Canadian-controlled corporations, alongside WSIB premium reductions and $4 billion in rebates, demonstrate significant policy commitment to maintaining Ontario's competitive position.
Market Outlook
The short-term outlook suggests vacancy rates will peak by late 2025 or early 2026 before beginning to stabilize as new supply deliveries moderate. This cooling construction pipeline should prevent oversupply conditions while allowing markets to absorb existing inventory more effectively. Rental rate growth is expected to remain subdued through 2025, with landlords likely focusing on tenant inducements rather than aggressive rate reductions.
Medium-term prospects remain constructive, supported by continued e-commerce expansion, supply chain reshoring trends, and ongoing infrastructure investment. The sector's defensive characteristics and income-producing potential make it particularly attractive in uncertain economic environments, though prolonged trade tensions and elevated recession risks remain key variables to monitor.
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