Ontario Industrial Cap Rate Trends 2026 - Toronto-Tight, Southwestern-Ontario-Improving

Ontario industrial cap rates in Q4 2025 ran from 5.00-5.25% (Toronto Class A) to 6.00-7.00% (Kitchener-Waterloo Class B), against a Canadian national industrial average of 5.91% (Class A) and 6.42% (Class B) per CBRE (CBRE Q4 2025 Canadian Cap Rate Report). The load-bearing 2026 trend: Southwestern Ontario industrial availability fell 40 bps year-over-year to 7.2% in Q1 2026 per Altus - the only major regional industrial segment that improved against trend, while national availability rose 40 bps to 6.2% (Altus Q1 2026 Canadian industrial market update, May 1, 2026). Ontario industrial in 2026 is not one market; it is tight Toronto, an improving Southwestern Ontario, and a KW block carrying outsized national supply.

Key Takeaways

Toronto Industrial Class A at 5.00-5.25% in Q4 2025 is the tightest industrial print of any major Canadian market CBRE tracks; Class B at 5.25-6.00% (CBRE Q4 2025).
Kitchener-Waterloo Industrial Class A at 5.75-6.50% and Class B at 6.00-7.00% in Q4 2025 sit roughly 75 bps wider than Toronto - the structural KW discount to GTA industrial (CBRE Q4 2025).
Southwestern Ontario industrial availability decreased 40 bps year-over-year to 7.2% in Q1 2026 per Altus - the only major regional industrial segment to improve against the national trend.
Canadian national industrial availability rose to 6.2% in Q1 2026 (+40 bps YoY) per Altus, while JLL reported national vacancy at 5.1% - the first decline since 2022 (Altus measures availability including sublet; JLL measures vacancy).

National Q4 2025 industrial cap rates plateaued in the high-5% / low-6% range, with Ontario markets spanning the full envelope.

CBRE's Q4 2025 cap rate report places Canadian Industrial Class A at 5.91% and Class B at 6.42%, a combined average of 6.16% (–3 bps QoQ). Altus's single-tenant industrial benchmark was 6.00% in Q4 2025 per the Altus Q4 2025 Canadian CRE Investment Trends Survey (January 20, 2026). The series have plateaued after the 2022-2024 expansion; the 2026 question is which sub-markets reprice and in which direction. The table below sets the three Ontario markets CBRE tracks by name against the national average.

Geography	Industrial Class A (Q4 2025)	Industrial Class B (Q4 2025)	Q1 2026 availability
Canada national avg	5.91%	6.42%	6.2% (Altus); 5.1% vacancy (JLL)
Toronto	5.00 - 5.25%	5.25 - 6.00%	5.1%
Kitchener-Waterloo	5.75 - 6.50%	6.00 - 7.00%	[STAT NEEDED: KW-specific Q1 2026 industrial availability]
Ottawa	5.50 - 6.00% per CBRE Q4 2025 (verified 2026-05-21)	6.25 - 6.75% per CBRE Q4 2025 (verified 2026-05-21)	[STAT NEEDED: Ottawa Q1 2026 industrial availability]
Southwestern Ontario (regional)	(rolls up into KW + London)	(rolls up into KW + London)	7.2% (–40 bps YoY)

Sources: CBRE Q4 2025; Altus Q1 2026; JLL Q1 2026.

The geographic breakdown: Toronto tightest, KW the national-supply outlier, Southwestern Ontario improving.

Greater Toronto Area

Toronto Industrial Class A at 5.00-5.25% in Q4 2025 is the tightest industrial cap-rate print of any major Canadian market in the CBRE national series. Q1 2026 industrial availability of 5.1% per Altus, with three consecutive quarters of positive net absorption, reflects continued logistics demand against a substantial pipeline - the GTA carries 9.8M sf under construction, the largest active industrial pipeline in Canada.

Kitchener-Waterloo and Southwestern Ontario

KW Industrial Class A at 5.75-6.50% and Class B at 6.00-7.00% sits roughly 75 bps wider than the equivalent Toronto bands. The structural discount reflects deal size, tenant covenant depth, and market liquidity - not weaker fundamentals. The Waterloo Region drove a disproportionate share of national industrial activity in Q1 2026: JLL Canada Industrial Q1 2026 (April 21, 2026) reports Waterloo Region carried approximately 20% of national new industrial supply with rents +2.9% quarter-over-quarter [STAT NEEDED: confirm Waterloo Region absorption figure in the gated JLL Q1 2026 Southwest Ontario Industrial Insight PDF]. Across the broader Southwestern Ontario block, Q1 2026 completions were 3 buildings totalling approximately 424,000 sf at roughly 75% available - thin completion volume against continued absorption is the proximate explanation for the 40 bps year-over-year availability improvement. See our Kitchener-Waterloo commercial market report for the broader market context.

Ottawa

Ottawa Industrial Class A was 5.50%–6.00% and Class B was 6.25%–6.75% in Q4 2025 per CBRE Q4 2025 (verified 2026-05-21). Ottawa industrial sits at the wider end of the national envelope but significantly tighter than Ottawa's office market. Ottawa office availability rose 170 bps year-over-year to 14.2% in Q1 2026 per Altus, driven by federal disposal-plan dynamics; the industrial picture is more insulated from that office-side pressure. Ottawa Q1 2026 industrial availability has not been separately published in an Altus or CBRE public release as of publication — it does not roll into the Southwestern Ontario block in the Altus series.

What is driving 2026 industrial movement: logistics demand, selective capital, and a Bank of Canada hold at 2.25%.

Three forces shape Ontario industrial in 2026. First, structural logistics demand: JLL's national vacancy reading of 5.1% in Q1 2026 - the first decline since 2022 - signals demand re-engaging supply after the 2023-2024 expansion. Second, selective capital: Altus Q4 2025 reported total Canadian CRE investment volume of approximately $51 billion in 2025, an 8% year-over-year decrease, with the bid-ask gap as the central friction; industrial transactions skew toward Class A modern logistics where lenders and institutional buyers can underwrite confidently. Third, the macro rate anchor: the Bank of Canada held the overnight rate at 2.25% on April 29, 2026 (Bank of Canada policy decision) - the fourth consecutive hold - supporting stable spreads (317 bps national cap-rate-to-10-year-GoC in Q1 2026 per CBRE) and a stable cost-of-debt assumption for industrial refinancing. For the broader refinance view, see our Canadian CRE refinance cycle 2026 analysis.

What this means for industrial commercial appraisals in Ontario.

Three implications for a CUSPAP 2026-compliant industrial appraisal. First, the Toronto-versus-KW basis spread is structural and must be defended explicitly when transactions in one market are used to support a value in the other - a 75 bps cap rate gap on the same NOI moves indicated value by roughly 12% on a 6.00% reference rate. Second, the Southwestern Ontario availability improvement is the only regional fundamentals tailwind in the national picture; for going-in cap rate selection on a KW or southwestern-Ontario asset, the rate-of-change in availability supports the lower half of the CBRE Q4 2025 range absent asset-specific reasons to widen. Third, the gated JLL Southwest Ontario insight is the single most important secondary data source for KW industrial work. To commission an industrial appraisal grounded in the Q1 2026 data above and signed by an AACI-designated practitioner, request an appraisal.

Frequently asked questions

What is the typical industrial cap rate in Toronto in 2026?

Toronto Industrial Class A was 5.00-5.25% and Class B was 5.25-6.00% in Q4 2025 per CBRE - the tightest industrial bands in any major Canadian market CBRE tracks. Q1 2026 industrial availability of 5.1% per Altus supports that pricing.

How do Kitchener-Waterloo industrial cap rates compare to Toronto?

KW Industrial Class A at 5.75-6.50% sits roughly 75 bps wider than Toronto Class A at 5.00-5.25% (CBRE Q4 2025) - a structural discount reflecting deal size, tenant covenant depth, and market liquidity.

Why is Southwestern Ontario industrial improving when the rest of Canada is not?

Southwestern Ontario was the only major regional industrial segment to improve year-over-year, with Q1 2026 availability of 7.2% (–40 bps YoY) per Altus. The driver is disciplined supply (Q1 2026: 3 completions totalling ~424,000 sf) against continued absorption, particularly in the Waterloo Region.