What is a Good ROI for Commercial Real Estate in Toronto? 

Commercial real estate in Toronto, ON, has long been a magnet for investors looking for stable income and long-term appreciation. As Canada’s largest city and economic hub, Toronto’s office towers, retail centres, industrial hubs, and mixed-use developments draw attention from both domestic and international buyers. However, what exactly constitutes a good return on investment in Toronto’s commercial market in 2025? Let’s find out.

What Makes Commercial Real Estate in Toronto, ON, Unique for Investors?

Commercial real estate in Toronto is unlike any other in Canada. The city’s booming population, thriving financial and tech industries, and well-connected transportation network create strong demand for office, retail, industrial, and mixed-use spaces. However, high acquisition costs, changing tenant expectations, and strict zoning rules add layers of difficulty for investors. Therefore, handling these challenges successfully means understanding Toronto-specific ROI trends and identifying the best opportunities.

The Leading Types of Commercial Real Estate in Toronto

1. Office Properties

Toronto’s office sector has been adjusting post-pandemic, with hybrid work reshaping demand. While downtown Class A office spaces still attract large corporations, vacancies are higher than pre-2020 levels. Suburban office buildings and flexible coworking spaces are seeing increased interest.

• Why it works: Long-term corporate leases provide predictable income. Investors in suburban offices can benefit from lower acquisition costs and strong rental demand.
• What to watch: Downtown vacancies remain a challenge, and tenant expectations are shifting toward modern, flexible spaces.
• Expected ROI: Typically 4–7% for core downtown assets, with suburban properties potentially yielding 6–8% depending on tenant mix.

2. Retail Properties

Toronto’s retail market is changing. While traditional malls face pressure from e-commerce, grocery-anchored plazas, service-focused shops, and neighborhood stores continue to do well. Busy streets in growing neighbourhoods, such as Liberty Village or Leslieville, still attract tenants willing to pay premium rents.

• Why it works: Services and experience-based retail keep a steady demand.
• What to watch: Retailers offering non-necessary goods may face higher turnover or slower growth.
• Expected ROI: 5–9%, depending on tenant quality and location within Toronto.

3. Industrial Properties

Industrial real estate has become a standout performer in Toronto. Warehouses, logistics hubs, and last-mile distribution centres are in high demand due to e-commerce growth. Scarcity of developable land and low vacancy rates are driving rental growth across the Greater Toronto Area.

• Why it works: Long-term leases, limited supply, and rising demand make industrial properties a stable investment.
• What to watch: Construction costs are rising, and land acquisition can be competitive, especially near highways and major logistics corridors.
• Expected ROI: 6–12%, often the highest among Toronto’s commercial sectors.

See also: Navigating the Darwin Property Market with Monsoon Real Estate

4. Mixed-Use and Multi-Use Developments

Mixed-use properties that include residential, retail, and office space are becoming more popular in Toronto’s busy urban areas. In addition, they provide different sources of income, which makes them less affected if one type of business slows down. For example, neighbourhoods like King West, Queen Street, and the waterfront are popular places for these kinds of properties.

• Why it works: Diverse revenue sources, strong tenant demand, and long-term growth potential.
• What to watch: Complex management and financing, as well as municipal approvals, can slow development timelines.
• Expected ROI: 5–10%, depending on the mix of tenants and location.

5. Specialty Assets (Hotels, Healthcare, Self-Storage)

Commercial real estate in Toronto, ON, can provide strong returns but requires specific knowledge. Hotels are bouncing back as tourism resumes, healthcare facilities benefit from the city’s growing population, and self-storage continues to offer consistent cash flow.

• Why it works: High-demand niches driven by population growth, lifestyle shifts, or demographic trends.
• What to watch: Operational intensity for hotels, regulatory compliance for healthcare, and location dependency for self-storage.
• Expected ROI: 6–12%, highly variable based on property type and management quality.

Factors That Influence ROI in Toronto

1. Tenant Quality: Investors should prioritize long-term, financially stable tenants because they help maintain consistent cash flow.
2. Lease Terms: The structure of a lease matters; for instance, a triple-net lease can reduce maintenance and operating risks for the owner of commercial real estate in Toronto.
3. Location: Being close to transit hubs, major highways, or fast-growing neighbourhoods drives higher occupancy rates and higher rental income.
4. Regulatory Compliance: Zoning rules, development approvals, and municipal policies can all affect long-term investment performance, so it is important to stay informed.
5. Diversification: Spreading investments across different property types or locations helps reduce risks that are specific to a particular sector or area.

Conclusion

Overall, investing in commercial real estate in Toronto, ON, can bring good returns, especially with industrial and mixed-use properties. Retail and office buildings are still worthwhile, but success depends on choosing the right tenants and picking the right locations.

Companies like Service Seekr guide investors through Toronto and Mississauga’s commercial property market. Their experience with locations, market trends, rules, and tenant planning can help make your investment safer and more profitable.So, get in touch with Service Seekr today to start investing smartly!