Top 7 Reasons to Consider Sale-Leaseback in GTA

A sale-leaseback lets you sell your industrial property, gain immediate cash, and continue operating from the same location through a lease agreement. In the Greater Toronto Area (GTA), this strategy has become popular for businesses looking to free up capital without relocating. Here's why:

• Access Full Property Value: Unlike traditional refinancing (50–60% loan-to-value), sale-leasebacks provide 100% of your property’s market value in cash.
• Generate Liquidity for Growth: Redirect funds into expansion, equipment, or paying off debt.
• Fixed Costs Amid Rising Rates: Avoid fluctuating mortgage rates with predictable lease payments.
• Stay in Your Current Location: No need to relocate, avoiding disruption and costs.
• Tax Advantages: Lease payments are fully deductible as operating expenses.
• Shift Property Management: Transfer long-term maintenance responsibilities to the buyer.
• Leverage Market Conditions: High property values and investor demand make 2026 an ideal time for such deals.

This approach is especially relevant in the GTA, where industrial property values have surged by 185% since 2019. Businesses can capitalize on these market trends while simplifying operations and improving financial health. Expert guidance ensures you secure favourable lease terms and maximize the benefits of this strategy.

Is a Sale Leaseback Right for your Business?

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1. Free Up Capital for Business Growth

A sale-leaseback offers a major benefit: instant liquidity. Unlike traditional bank loans, which typically provide only 50% to 60% of a property's value, a sale-leaseback unlocks the full appraised market value of your real estate. This turns an illiquid asset into working capital that can drive business growth. Real-world examples highlight its effectiveness.

Take the case of a $20M industrial facility in the Greater Toronto Area (GTA) in early 2026. Torys LLP facilitated a sale-leaseback deal at a 7% cap rate. The transaction generated immediate proceeds and resulted in $1.4M in annual rent, allowing the business to redirect funds into its core operations.

The real advantage lies in reinvesting this freed-up capital into areas that directly contribute to growth. As Alex Tanenbaum and Jared Fontaine from Torys LLP point out, private equity firms and business owners are increasingly realizing that channelling funds into the "pure play" operating assets - those that private equity can transform most effectively - yields much higher returns than holding onto real estate. This is especially true in markets like the GTA, where industrial property values skyrocketed by 185% between 2019 and 2025.

Bronwyn Scrivens, an Associate Broker at Omada Commercial, adds further insight:

"The amount of equity tied up when owning real estate may restrict company possibilities, while leasing can at times provide more opportunity to reinvest into additional products, services and growth opportunities".

Whether you're looking to expand, invest in new equipment, or pay down debt, the proceeds from a sale-leaseback offer financial flexibility that property ownership often limits.

Additionally, this type of transaction removes mortgage liabilities from your balance sheet while allowing you to retain operational control through a triple net lease structure. Unlike loans, the proceeds are not subject to repayment. This combination of reduced liabilities and operational freedom makes it easier to focus on growth.

2. Lower Debt and Increase Financial Flexibility

A sale-leaseback doesn't just generate working capital - it’s also a smart way to reduce debt and improve your company's overall financial health. By selling your industrial property, you can use the proceeds to pay off mortgages, lines of credit, or high-interest corporate debt that may be holding your business back.

Here’s how it stands out: traditional refinancing often caps cash access at 50%–60% of the loan-to-value (LTV) ratio. In contrast, a sale-leaseback provides the full market value in cash. Imagine a business carrying a $10 million mortgage on a property now worth $15 million. With refinancing, they might only access $7.5 million. But with a sale-leaseback, they’d get the full $15 million - enough to clear the debt entirely and still have $5 million available for other needs.

Take KONG Company as an example. In February 2023, the company chose a sale-leaseback instead of refinancing. This decision gave them immediate cash to pay off their acquisition loan while allowing them to stay in the same location. Howard Wasserman, Partner at Segal LLP, summed it up:

"Yes, you have to pay tax on [the proceeds], and you're now, in essence, a tenant. But just from a cash flow perspective, you're much better off".

Eliminating debt also transforms your financial outlook. By removing mortgage liabilities, your balance sheet looks stronger, improving your debt-to-equity ratio and opening up future borrowing opportunities. Plus, you replace fluctuating mortgage interest and restrictive covenants with a predictable lease payment. Unlike mortgage interest, which is only partially tax-deductible, lease payments are usually 100% tax-deductible as an operating expense.

For middle-market companies facing capital costs between 8% and 12%, sale-leasebacks offer a more cost-effective solution. Industrial cap rates in key GTA markets are hovering in the sub-5% to sub-6% range, making sale-leasebacks a cheaper alternative to traditional debt in today’s high-interest environment. Jack Morrison and Doug Smith from Plante Moran Realpoint explain:

"A sale-leaseback can be an alternative form of financing... a sale-leaseback could be a cheaper form of capital than traditional debt, especially considering rising interest rates in today's debt market".

3. Benefit from GTA Market Conditions

The industrial market in the Greater Toronto Area (GTA) is thriving, making it an excellent time to consider sale-leaseback transactions. Even with broader economic uncertainties, property values have stayed near historic highs, giving property owners a unique chance to sell at premium prices.

Over the six years leading into 2026, industrial property values in the GTA have skyrocketed by 185%, translating to a steady annual growth rate of 10%. By late 2025, the average sale price for industrial investments reached $275 per square foot, just 7% shy of the record high of $293 per square foot set in 2023. Freehold properties performed even better, with a weighted average price of $379 per square foot in Q4 2025. These numbers highlight the market's resilience and continued strength.

Investor demand is another major factor driving the market. Institutional investors, such as pension funds and life insurance companies, are making a strong comeback. In 2026, they are projected to make up around 45% of all industrial property purchases, a huge leap from less than 20% in 2024. These investors are particularly drawn to properties with long-term lease agreements, as they provide consistent and predictable cash flow - precisely what a sale-leaseback arrangement offers.

Victor Cotic, Gord Cook, Max Brenzel, and Farabe Wahab from Colliers' National Investment Services describe the opportunity like this:

"For investors with a long-term view of the GTA industrial market, now may be an ideal time to be an active buyer. Opportunities with cashflow provide a safeguard for any near term rental rate softening".

On the supply side, the outlook is equally compelling. New construction in the GTA industrial market is expected to slow significantly by late 2026, signalling a potential supply crunch. Availability remains tight at around 4.6%, and Q4 2025 recorded 4.1 million square feet of positive absorption, the highest in three years. This combination of limited supply, high demand, and strong investor interest makes 2026 an opportune moment for property owners to secure sale-leaseback deals. These conditions not only elevate property values but also enhance the appeal of sale-leasebacks in the GTA.

4. Keep Operating from Your Current Location

One of the key benefits of a sale-leaseback arrangement is that your business can stay exactly where it is. There’s no need to pack up and move, which means your operations can continue seamlessly. Your team works from the same facility, avoiding any disruption to day-to-day activities. This stability pairs well with the financial perks discussed earlier.

For industrial businesses in the GTA, staying put is especially important. Relocating a manufacturing plant or warehouse isn’t just inconvenient - it’s expensive. As Bronwyn Scrivens, Associate Broker at Omada Commercial, points out:

"A side benefit is avoiding the often exorbitant costs of relocation which would be incurred through a traditional sale".

Sale-leaseback agreements also offer long-term peace of mind. Lease terms typically range from 10 to 20 years, with options to extend occupancy for up to 40 or even 50 years. With an NNN lease, you maintain control over your operations without the headache of moving.

A real-world example illustrates how this works. In November 2006, Volkswagen of Canada completed a sale-leaseback for its 343,249-square-foot distribution centre in the Toronto market. First Industrial Realty Trust purchased the property and leased it back to Volkswagen for 15 years. Johannson Yap, Chief Investment Officer at First Industrial Realty Trust, Inc., explained:

"We successfully completed this transaction... to help Volkswagen monetize real estate for re-investment, while continuing the use of its distribution centers".

For industrial businesses in the GTA, staying in your current location means more than just convenience. It protects your operational strengths while offering strategic advantages. A sale-leaseback allows you to free up essential capital while leveraging the GTA’s proximity to customers, supply chains, and a skilled workforce - key factors that drive your business forward.

5. Take Advantage of Canadian Tax Benefits

Sale-leasebacks don't just provide operational stability - they also come with tax perks that can bolster your financial strategy, especially in the GTA. These transactions combine liquidity, operational continuity, and tax advantages, making them an appealing choice for businesses.

Under Canadian tax laws, sale-leasebacks offer a notable benefit: lease payments are fully deductible as operating expenses. Compare this to property ownership, where only the interest portion of mortgage payments qualifies for a deduction. With a sale-leaseback, you can write off 100% of your rent. Bronwyn Scrivens, Associate Broker at Omada Commercial, highlights this distinction:

"A sale-leaseback allows a business to take advantage of tax benefits awarded to tenants. While mortgage interest is only a partial deduction, lease payments can be 100 per cent written off as an expense".

This full deduction reduces your taxable income significantly. Beyond that, converting your property into a lease arrangement removes it from your balance sheet, helping you sidestep capital tax liabilities. As Bruce A. McKenna of McMillan LLP explains:

"The vendor... will be entitled to deduct its rental as an ongoing operating expense and avoid capital tax".

For older buildings, the annual tax savings from this approach often outweigh the benefits of relying on depreciation. To make the most of these tax advantages, consult with experienced advisors who can help structure the deal to suit your business needs.

6. Transfer Property Management Responsibilities

Owning industrial property can pull your attention away from your main business activities. By opting for a sale-leaseback, you can transfer long-term property management - like major repairs and upkeep - to the buyer. This arrangement frees you to concentrate on production and serving your clients without the distractions of property management.

Bruce A. McKenna from McMillan LLP puts it well:

"The company... is not a professional real property investor or land developer. Its expertise is in manufacturing, sales and client service... It can use the real estate expertise of purchasers to handle future property issues."

In many sale-leaseback deals, particularly triple net leases, tenants handle routine maintenance, but landlords typically take on major capital expenses, such as replacing a roof or addressing structural repairs. To avoid confusion, make sure your lease clearly defines who is responsible for maintenance and how costs are divided.

You can also negotiate the amortization of significant capital expenses to better align with your business operations and internal practices.

7. Work with Experienced Professionals Like Lennard Commercial

When it comes to sale-leaseback transactions, having the right expertise on your side can make all the difference. These deals are more than just financial arrangements - they’re strategic decisions that require a deep understanding of market trends and careful negotiation. Without expert guidance, you risk ending up with unfavourable lease terms or selling your property for less than its true value. That’s why partnering with professionals who know the ins and outs of the GTA industrial market is crucial.

Lennard Commercial brings extensive market knowledge to every transaction. Michael Law and his team focus on industrial real estate throughout Toronto and the Greater Toronto Area, offering strategies tailored to acquisitions, dispositions, and leasing. Their ability to handle valuation, lease structuring, and due diligence ensures you get the most out of your transaction while safeguarding your operational needs for the long term.

Here’s a key advantage: while traditional refinancing typically offers only 50%–60% loan-to-value (LTV), a well-structured sale-leaseback can unlock the full market value of your property. Experienced advisors know how to negotiate the lease rate first, as the final sale price often depends on the rent and cap rate. This approach directly impacts your total proceeds, helping you secure the best financial outcome.

Bruce A. McKenna from McMillan LLP highlights the delicate balance involved in these transactions:

"The challenge for the lawyer drafting the documents in a sale-leaseback transaction is to strike a balance between the goal of the broker to have the most marketable product that it can and the goal of the vendor to ensure that it has adequate protections for its business interests in the future."

In addition to unlocking liquidity and reducing risks, seasoned professionals ensure every detail of the agreement works in your favour. This includes negotiating operational clauses like signage rights, security measures, and room for future expansion. They also clarify responsibilities for major expenses, such as roof replacements or structural repairs, to avoid unexpected costs down the line. Advisors can even help you evaluate "hold-versus-sell" scenarios, navigate ASC 842 lease-accounting rules, and ensure your rent stays in line with market rates to support your business’s growth.

Conclusion

Sale-leaseback transactions provide industrial property owners in the GTA with a practical way to access capital, improve financial health, and maintain control of their operations - all without needing to relocate. Unlike traditional refinancing, this approach converts your property into its full market value in cash. The funds can then be channelled into high-return investments like upgrading equipment, expanding inventory, or pursuing acquisitions. Other perks include better financial ratios, fully tax-deductible lease payments, and protection against potential property value declines or rising interest rates.

The GTA's thriving industrial market, combined with advantageous Canadian tax rules and the chance to offload property management responsibilities, makes sale-leasebacks an appealing choice for owner-operators. Whether you aim to reduce debt, fund growth, or streamline your financial structure, this strategy offers a blend of flexibility and operational stability.

To fully benefit from a sale-leaseback, expert guidance is key. Professionals can help structure leases with competitive terms, ensure sustainable rental rates, and maximize the value of your property. This expertise ensures your business achieves the best possible outcome.

Lennard Commercial brings a wealth of market insight and customized strategies to every sale-leaseback deal in Toronto and the GTA. Michael Law and his team specialize in industrial real estate, including acquisitions, dispositions, and leasing. Their expertise helps navigate complex negotiations, enhance property value, and secure terms that align with your business goals.

Reach out to Michael Law at Lennard Commercial for personalized industrial real estate solutions that turn your property into a powerful growth asset.

FAQs

What lease terms should I negotiate in a sale-leaseback?

When working through lease terms in a sale-leaseback, aim for a long-term lease - typically spanning 10 to 20 years - to provide stability for your business operations. Ensure the lease terms are in sync with the purchase agreement to keep the transaction seamless. It’s also crucial to define who handles maintenance and repairs upfront to prevent conflicts down the road. Crafting clear, customized terms that align with your operational and financial needs is essential for a successful deal.

Will a sale-leaseback affect my balance sheet and future borrowing?

A sale-leaseback allows you to turn property assets into liquid capital, which can free up equity and potentially increase your borrowing power. On the flip side, it creates long-term lease commitments that could affect your financial ratios. Weigh these aspects carefully to ensure they align with your business objectives.

What taxes or fees will I owe after selling my property?

After completing a sale-leaseback, you could still be responsible for property taxes. In a net lease arrangement - like a triple net lease - tenants usually handle these taxes. However, additional charges might arise depending on local laws. Carefully review your lease agreement and consult a professional to get a clear understanding of your responsibilities.