Commercial leasing in the GTA — office, retail and industrial

The market data on this site is residentialThe benchmarks, sales counts and days-on-market figures published across these pages come from TRREB's residential releases. They say nothing about office, retail or industrial space, and nothing on this page is derived from them. Rental evidence for commercial space is assembled per submarket and per building type — ask and we will put it together for the requirement you actually have.

We act for tenants taking commercial space and for landlords letting it across the Greater Toronto Area. The Residential Tenancies Act does not apply here: a commercial tenancy is governed by the lease you sign and by the Commercial Tenancies Act, which offers far less protection and assumes both parties are advised.

Net rent is not the cost

Most commercial space is quoted as a net rate per square foot per year, with additional rent — realty taxes, maintenance and insurance — charged on top. Additional rent varies enormously between buildings and can approach the net rate itself. Comparing two spaces on the net figure alone is the most common and most expensive mistake a tenant makes.

Ask for the current additional rent, the previous two years of it, and what is included. A building that recovers management fees, capital repairs or a share of a landlord's structural obligation through additional rent costs more than one that does not.

The clauses that matter

Permitted use, and exclusivity. A use clause narrow enough to block your own expansion is a real constraint. In retail, an exclusivity covenant that stops the landlord letting to a direct competitor may be worth more than a rent reduction.
Assignment and subletting. If you sell the business, the lease usually goes with it. A landlord's absolute discretion to refuse can make the business unsaleable.
Renewal and expansion. A renewal option at a rate to be agreed is close to no option at all. Tie it to a mechanism.
Relocation and demolition. Common in older retail and office. Read what compensation, if any, attaches.
Restoration at the end. An obligation to return the space to base building can cost more than a year's rent, and it is agreed at the start.
Guarantees. A personal guarantee or indemnity survives the corporation. Negotiate its length and its cap.

Get a lawyer on the lease

Not on the offer to lease alone. Commercial leases run to dozens of pages of landlord-drafted terms and are negotiable in ways residential leases are not. Legal fees here are small against a multi-year obligation, and this is the one recommendation on this page we would make regardless of the deal size. HST applies to commercial rent — confirm the treatment with your accountant.

Also

Buying the building instead is commercial sales. Residential rentals run under an entirely different statute — see leasing.

Tell us the use, the area and the term.

Six stages, from the requirement to occupancy.

Two documents carry this transaction, and the second is the one that matters. Here is the sequence and what has to be settled at each stage.

Requirement

Use, area, power and loading for industrial, frontage and foot traffic for retail, term and growth. Also the covenant you can offer, because it decides what a landlord will spend on you.

Shortlist

Space compared on gross occupancy cost, not on the headline net rent. Additional rent — taxes, maintenance and insurance — varies widely between buildings and is the figure that makes a cheap-looking space expensive.

Offer to lease

Term, net rent and escalations, the fixturing period, landlord’s work and any improvement allowance, and the deposit. This document decides the commercial terms even where the lease has yet to be drafted.

The lease

Where the value actually sits: permitted use, exclusivity, assignment and subletting, renewal and expansion rights, relocation and demolition clauses, restoration obligations at the end, and any personal guarantee or indemnity.

Approvals

Zoning and permitted use confirmed with the municipality for your use, then building permits and any licensing your business needs. Confirm before the fixturing clock starts, not after.

Occupancy

Fixturing, inspections and the commencement date. Rent typically starts on commencement rather than on possession — know which of those two dates each obligation hangs from.