Commercial real estate investment activity was down in the Greater Toronto Area (GTA) last year from 2023 and, after a brief spate of optimism in the fall and early winter, a series of issues continue to concern the market today.

“We were a little bit more optimistic in November compared to now, especially with the Bank of Canada perhaps not being as aggressive with lowering interest rates,” Altus Group vice-president of data solutions and client delivery Ray Wong told RENX.

“I think interest rates will still fall, but maybe not at that same pace. And even though inflation is in the target range, the challenge going forward is potential tariffs from the U.S. and whether or not this decrease in immigration will impact our growth.”

Investment activity was up last year in Montreal, Vancouver and Ottawa, but things are lagging in the GTA and Ontario’s Greater Golden Horseshoe region.

Wong said much of that can be attributed to large bid-ask spreads between buyers and sellers, a lack of available product, and relatively high Bank of Canada bond rates.

“I think people will be watching over the next few months to give themselves a little bit more confidence to get re-engaged in the market,” Wong said. “But I think, in between now and then, there still will be some opportunistic investors and probably some owners that will have to sell based on certain market conditions.”

Industrial led the way in transaction volume

Investors today are most interested in food-anchored retail strips, suburban rental apartments, industrial properties and regional malls, and there’s not enough of them available at attractive prices.

Industrial had the highest transaction volume total of any sector in the GTA at $5.55 billion during 2024, followed by:

• residential land at $3.36 billion;
• apartments at $2.34 billion;
• retail at $2.08 billion;
• industrial, commercial and investment land at $1.99 billion;
• office at $1.64 billion;
• apartments at $1.28 billion;
• hotels at $125.3 million;
• and residential lots at $20.9 million.

Wong said GTA office leasing activity was up from 2023, particularly for class-A space, partly due to return-to-office mandates from some technology firms and financial institutions. Demand also remains for space in AA and A office buildings.

“I think the market fundamentals are there but you’re probably not going to see a huge rebound in office rental rates just because there’s still a lot of availability,” Wong observed, noting that most office building owners don’t have to sell because they’re still covering their costs despite higher vacancies and lower rents.

Some office and retail properties are seen as conversion, intensification or redevelopment plays.

Canadian private investors were the most active

Canadian private investors accounted for the highest share of GTA acquisition volume with $8.44 billion. Developers were responsible for $2.93 billion, users for $2.02 billion, Canadian public investors for $1.09 billion, foreign public investors for $711.1 million, institutions for $466.7 million, governments for $385.6 million, foreign private investors for $68 million and builders for $41.2 million.

“For certain assets, I think we’re still going to have foreign buyers step up, but I think they might be a little bit cautious,” Wong predicted. “Foreign buyers are looking on a global basis and there’s probably some monies that are targeted for Canada, but they’re also looking for the right asset that makes a difference in the marketplace or helps their overall portfolio.”

Owner-users became more active in industrial acquisitions because there was less competition from investors.

There may be challenges for some owners to hold on to vacant land this year unless interest rates come down faster, Wong believes.

The GTA’s top 10 CRE transactions

These were the 10 largest (dollar value) CRE transactions of 2024 in the GTA, according to Altus Group.

1. Brookfield Properties acquired a Toronto apartment building at 77 Davisville Ave. and the nearby three-tower Village Green Apartments at 55 Maitland St., and 40 and 50 Alexander St., encompassing 1,188 units, from Greenrock for $437.18 million on Sept. 5.

2. Prologis, a San Francisco-based REIT specializing in logistics properties, acquired a 12-year-old, 1.34-million-square-foot industrial building on 79.25 acres at 8450 Boston Church Rd. in Milton from Sycamore Partners for $361 million on Aug. 28. It will continue to serve as a RONA distribution centre through a 15-year leaseback.

3. Prologis also acquired 1.62 million square feet of industrial space on 90.2 acres on Steeles Avenue East and Melanie Drive in Brampton from Canadian Tire Corporation for $258.1 million on Dec. 13. Canadian Tire is leasing back the distribution centre temporarily but the long-term plan is for Prologis to redevelop.

4. George Brown College and Halmont Properties Corporation acquired a 15-year-old, 484,477-square-foot multi-tenanted office building on 2.43 acres at 25 Dockside Dr. in Toronto from H&R REIT for $232.5 million on April 15. Existing leases, including the largest one to main tenant Corus Entertainment, will be honoured. George Brown plans to gradually incorporate academic functions into the space.

5. Starlight Investments acquired apartment buildings at 120 Torresdale Ave. and 300 Antibes Dr. in North York, encompassing 618 units, from Oxford Properties for $216.3 million on Sept. 25.

6. Toronto Metropolitan University (TMU), Brookfield and Halmont acquired a 75 per cent interest in a 21-year-old, 20-storey, 477,000-square-foot multi-tenanted office building on 0.89 acres at 2 Queen St. E. in Toronto from Alberta Investment Management Corporation and CPP Investments for $161.25 million on Dec. 2. It will provide TMU with 4.5 floors of office space.

7. Liberty Development Corporation acquired 8.26 acres of high-density residential land at 7700 Bathurst St. in Vaughan from The Torgan Group for $136 million on Feb. 1. The site is home to Promenade Village Shoppes. There’s no development application for it yet but it’s adjacent to Liberty’s current development site for Promenade Park Towers, which consists of two towers with a combined 761 residential units and retail at grade.

8. Starlight and BGO acquired a new 227-unit apartment building on 2.47 acres at 1475 Whites Rd. in Pickering from Pine Ridge Tower Ltd. for $127.1 million on Nov. 5.

9. Solmar Development Corp. acquired 98.21 acres of low-density residential land at 12561 Centreville Creek Rd. in Caledon from an individual for $125 million on June 27. There are no development applications in place but Solmar previously acquired an adjacent 98.8-acre site at 12494 The Gore Rd. for $16.5 million in 2018 and a 26.7-acre site for $9 million in 2020.

10. Giampaolo Investments Ltd. acquired 97.88 acres of medium-density residential land at 2055 Bovaird Dr. W. and 9980 Mississauga Rd. in Brampton for $122.5 million on Feb. 22. The site, occupied by a golf driving range and a gas station, was purchased from the Ontario Superior Court of Justice in a distress sale. The developer proposes a mix of high-rise and medium-density housing.

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