Q1 2026 Market Dashboard

Comparable vacancy/availability measures are combined with investment, rent and construction-cost context where conventional vacancy metrics are less meaningful.

Interpretation: Toronto remains one of Canada’s deepest commercial real estate markets, but Q1 2026 conditions are highly segmented. Multi-family and industrial capital remain active, office is improving from a weak base, retail is tight but exposed to consumer and anchor risk, hotels are event-supported, and medical real estate is driven by defensive, needs-based demand.

Macro and Capital-Market Context

The GTA’s 2026 market is defined by disciplined re-entry rather than full risk-on behaviour.

Altus Group reported that the GTA started 2026 with nearly $3.8 billion of CRE transaction dollar volume, a modest 3% decline year-over-year. The headline stability masks a sharp divergence by sector: multi-family investment rose to nearly $675 million, office volume rose to $485 million, industrial reached $1.5 billion, retail fell to $314 million, and land pulled back to roughly $796 million. [S1]

Capital is available, but underwriting has shifted. Buyers are prioritizing income certainty, newer or renovated assets, resilient tenants and lower capex exposure. Developers are more cautious because feasibility depends on a combination of interest rates, hard costs, development charges, entitlement timing, leasing depth and lender confidence.

Multi-family Market

Investment capital is engaged, but the operating market is absorbing a tenant-favourable reset.

Multi-family leads this report because rental housing is central to Toronto’s long-term real estate thesis. In Q1 2026, that thesis remained intact, but the near-term operating market softened. Altus reported nearly $675 million of GTA multi-family dollar volume, up 232% year-over-year, while Urbanation reported materially higher vacancy and incentives across newer purpose-built rental buildings. [S1][S6]

Urbanation reported that stabilized GTHA rental buildings completed since 2000 reached 5.4% vacancy in Q1 2026, up from 3.6% a year earlier and more than double the 2.6% level two years earlier. Availability reached a record 8.0%, 66% of projects offered incentives, and net rents after incentives averaged $3.52 psf, down 3.8% annually. [S6]

The investment implication is nuanced. Toronto rental remains a core long-term asset class, but acquisition and development underwriting should use more conservative lease-up assumptions, explicit incentive allowances, and sensitivity analyses around turnover, condo rental competition and slower population growth. IPA’s 1Q 2026 report similarly frames Toronto as tight because of underbuilding, while noting upward pressure on vacancy and softer population inflows. [S11]

Office Market

Downtown Toronto is improving, but the recovery is quality-led and highly uneven.

Office fundamentals improved sharply in Q1 2026. CBRE reported that Downtown Toronto vacancy decreased by 120 bps to 13.4% as the market recorded more than 2.1 million square feet of net absorption - the largest quarterly absorption figure in recorded history. Class AAA and Class A accounted for most of the space taken. [S2]

The recovery is spreading beyond the Financial Core and the newest AAA assets, but it remains bifurcated. CBRE noted that the margin between premium assets and Class A performance has narrowed, while large-block vacancy continues to decline and demand is moving into the Greater Core as prime Financial Core options tighten. [S2]

Colliers also reported a second consecutive quarter of positive activity and highlighted that CIBC Square II accounted for more than half of Q1 absorption as it reached full occupancy. Colliers described CIBC Square II as the final addition of new Downtown supply until an estimated 2031. [S4]

Hotel Market

Event demand and urban travel are supportive, but operating costs and post-event normalization must be underwritten.

Toronto hotel fundamentals are supported by a deep corporate base, citywide events, tourism, conventions, sports and the 2026 FIFA World Cup catalyst. Cushman & Wakefield noted that Canadian hotel RevPAR reached a historic high in 2025 and that Toronto and Vancouver should receive additional demand support in 2026 as host markets for FIFA World Cup activity. [S9]

The underwriting challenge is that revenue growth does not automatically translate into NOI growth. Labour availability, utilities, insurance, property taxes, brand standards, FF&E reserves and unionized operating environments can absorb a meaningful portion of top-line improvement. CBRE’s Q1 2026 cap-rate guidance places Toronto Downtown Full-Service hotels at 5.25%-6.50%, Suburban Limited Service at 8.00%-9.00% and Focused Service at 7.50%-8.50%. [S10]

Development feasibility remains difficult. Altus places GTA 2026 hard costs at $235-$325/sf for budget hotels, $325-$420/sf for suite hotels and $365-$565/sf for four-star full-service hotels, with FF&E excluded. [S12]

Retail Market

Retail remains one of the tighter property sectors, but the story is shifting from scarcity to selectivity.

Toronto retail continues to benefit from dense population, limited new supply, high-street demand, food and beverage activity, and daily-needs formats. Lee & Associates reported Q1 2026 retail vacancy of 2.4%, average NNN asking rent of $35.41 psf and an average sale price of $501 psf. [S7]

The market is no longer uniformly tight. Lee & Associates noted that slowing population growth, economic uncertainty and major anchor closures such as Hudson’s Bay added larger blocks of space back to the market. This weighed on absorption, with trailing 12-month net absorption of negative 1.46 million square feet. [S7]

From an investment perspective, grocery-anchored, service, fitness, medical/wellness, food and beverage and transit-adjacent retail remain the most defensive formats. Generic large-format vacancies, weak enclosed-mall space and discretionary tenant categories require stronger downtime, TI and re-tenanting assumptions.

Industrial Market

Industrial is transitioning from rental reset toward stabilization as the pipeline moderates.

GTA industrial remains one of the strongest long-term CRE sectors because of logistics depth, consumer density, highway access, labour availability and e-commerce/distribution demand. Q1 2026 data point to stabilization rather than accelerating weakness. CBRE reported 2.0 million square feet of positive absorption and 8.1 million square feet of absorption over the last three quarters. [S3]

Availability held steady at 5.0% following two consecutive decreases. Average asking net rent fell only $0.06 psf quarter-over-quarter to $16.32 psf, suggesting that rental-rate declines are slowing. CBRE also noted that the under-construction pipeline has fallen to its lowest level since 2018. [S3]

Colliers similarly described resilient activity, positive absorption driven largely by logistics tenants, limited new supply and continued downward pressure on net rents. Cushman & Wakefield reported that vacancy rose only 10 bps to 5.1%, an 11-year high but with moderation in quarterly vacancy growth. [S5][S8]

Medical / Healthcare Real Estate

Medical real estate is a defensive, service-led channel with higher construction and operational complexity.

Medical real estate is not reported with the same quarterly vacancy transparency as office, retail or industrial. For that reason, this section is framed around demand drivers, healthcare infrastructure, outpatient migration and construction feasibility. Demand is supported by aging demographics, outpatient care, diagnostics, specialist clinics, wellness services and limited purpose-built clinical supply in accessible nodes. [S15]

Toronto also benefits from major institutional health infrastructure. Public project activity around North York General Hospital’s new patient care tower and UHN’s Toronto Western Hospital surgical tower demonstrates continued public-sector investment in acute-care and specialized health capacity. [S13][S14]

From a real estate perspective, the opportunity set includes medical office, diagnostics, dental, rehab, mental health, wellness, urgent care and medtail formats near transit, hospitals, dense residential catchments and parking. The feasibility challenge is that medical users often require higher mechanical/electrical loads, plumbing, accessibility, infection-control considerations, elevator capacity, specialized fit-out and longer decision cycles.

Notable Q1 2026 Transactions & Development Signals

Select transactions illustrate which asset profiles attracted capital in Q1 2026.

Source: Altus Group Q1 2026 Toronto CRE market update and transaction notes. This table is not intended to represent all transactions in the market. [S1]

Construction Cost & Feasibility Context

Replacement cost remains central to Toronto real estate strategy.

Altus Group’s 2026 Canadian Cost Guide positions the following values as hard-cost benchmarks for initial budgeting. These ranges do not include soft costs such as land, legal, permits, development charges, consultants, financing, contingencies, marketing, taxes, insurance, management costs or developer profit. [S12]

Precedent view: In Toronto, feasibility is less about proving long-term demand and more about aligning land basis, approvals, product design, operating cost assumptions, tenant demand and construction pricing. Projects with phased risk, predictable debt, defensible leasing and strong cost control are better positioned than projects relying on generic rent growth or cap-rate compression.

2026 Outlook & Strategic Implications

Selective resilience is the base case for the remainder of 2026.

Overall recommendation: pursue assets and projects where market demand, design, operating model and capital structure are mutually reinforcing. The best opportunities are likely to be income-secure, location-defensible and execution-disciplined rather than speculative or purely yield-chasing.

Source Notes

This report uses public market data, brokerage research, construction-cost benchmarks and public-sector project information available as of May 2026. Figures may be revised by source providers and may differ where sources use vacancy versus availability, different submarket definitions, or different inventory universes.

Disclaimer & Limitations

This publication has been prepared by Precedent Developments for general market information and public educational purposes only. It does not constitute legal, tax, accounting, valuation, appraisal, engineering, quantity-surveying, investment, financing, leasing or brokerage advice. Readers should not act upon the information contained herein without obtaining advice from qualified professionals based on the specific facts and circumstances of their property, transaction, project or business decision.

Market statistics are drawn from third-party sources believed to be reliable, but Precedent Developments has not independently audited those data sources and does not warrant their accuracy, completeness or suitability for any particular purpose. Commercial real estate data can vary materially by source methodology, geography, property type, building class and reporting period

Construction-cost data are conceptual market benchmarks only and do not include all project costs. Actual costs can vary significantly based on design, scope, site conditions, labour and material markets, procurement approach, schedule, code requirements, tariffs, taxes, financing, insurance, permits, development charges and other soft costs. All images are illustrative and should not be interpreted as specific assets, listings or projects.

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