Toronto Commercial Real Estate: How Trump’s Policies Affect Mixed-Use Markets

The implementation of U.S. tariffs on Canadian goods has created new challenges for Toronto mixed-use developments. As economic nationalism rises on both sides of the border, Toronto’s integrated commercial-residential spaces face an uncertain future shaped by shifting costs, changing demand patterns, and evolving municipal priorities. The city’s mixed-use developments—which have been at the forefront of Toronto’s urban planning since the 1986 zoning bylaw that first allowed commercial and residential units to coexist—now find themselves at the intersection of international trade tensions and local economic adaptation strategies. This analysis examines how these pressures are reshaping the landscape for projects like The Well and other Toronto mixed-use developments across the Greater Toronto Area, with particular attention to the shifting balance between residential and commercial occupancy as businesses and developers navigate this new economic environment.

Toronto’s Mixed-Use Development Landscape Before the Trade War

Toronto has long been a pioneer in mixed-use development, implementing forward-thinking zoning policies that have fostered integrated urban spaces for decades. Back in 1986, Toronto created a zoning by-law that allowed commercial and residential units to coexist, positioning the city as an early adopter of this development approach1. This foundation has supported the growth of numerous mixed-use projects throughout the region, creating vibrant, walkable neighborhoods that combine living, working, and shopping opportunities within cohesive urban environments.

The most ambitious of these projects, The Well, opened in late 2024, exemplifying the scale and potential of mixed-use development in Toronto. With 1.2 million square feet of office space, 320,000 square feet of retail and food space, and 1,700 residential units spread across six rental and condo buildings, The Well was designed to house over 11,000 residents1. This massive project represented a significant investment in Toronto’s mixed-use future and demonstrated strong market confidence in the integrated development model. Beyond its direct benefits to residents and businesses, The Well generated over $63 million in net fees, charges, and benefits to the city, including $1 million for subsidized rental housing, even before opening its doors1.

Mixed-use developments have been particularly attractive to investors due to their ability to mitigate risk through diversification. By combining residential, commercial, retail, and sometimes even industrial spaces within a single integrated environment, these projects offer multiple revenue streams that can help buffer against sector-specific downturns4. Additionally, these developments typically command higher property values and rental rates due to their premier locations and abundant amenities, further enhancing their investment appeal4. The rising popularity of mixed-use projects has been supported by broad consumer trends, including increased urbanization, a preference for walkable neighborhoods, and evolving work habits that blur the boundaries between professional and personal spaces.

Impact of Tariffs on Construction Costs and Development Pipeline

The implementation of Trump’s 25% tariffs on most Canadian exports (with 10% on energy products) and Canada’s retaliatory measures have created significant challenges for Toronto’s construction sector, with direct implications for mixed-use developments. While Canada’s countervailing tariffs have largely avoided construction goods, important exceptions include steel and aluminum products5. These materials are particularly crucial for high-rise mixed-use developments, which typically require substantial steel structural components. Canadian tariffs on metal imports present a special concern for these projects, at least until the Canadian industry can pivot to meet domestic supply needs5.

The tariff situation extends beyond the direct materials trade between Canada and the U.S. to affect the entire construction ecosystem. The broader economic uncertainty created by these trade tensions has already impacted Toronto’s real estate market, with property sales plunging 27.4% year-over-year in February 2025. This market hesitation reflects buyers’ concerns about the economic outlook, with many adopting a “wait-and-see approach” as trade relations with the United States remain uncertain. For mixed-use development projects still in the planning stages, this uncertainty creates additional risk that may delay investment decisions or alter project scopes.

Developers of mixed-use projects must now navigate a complex and shifting landscape of material sourcing challenges. With tariffs affecting appliances imported from the U.S.—of which Canada imports approximately $3.1 billion worth annually—builders will need to seek domestic or international alternatives to avoid the 25% price increase5. Similarly, the inclusion of trucks on Canada’s second tranche of retaliatory tariffs will impact construction logistics costs, further pressuring development budgets5. These rising costs may force developers to reconsider the scale, timing, or composition of planned mixed-use projects, potentially reducing commercial components that typically have higher construction costs per square foot than residential units.

Shifting Tenant Dynamics in Response to Economic Nationalism

The rise of economic nationalism on both sides of the border is creating a transformed landscape for tenants and businesses operating in Toronto’s mixed-use developments. Mayor Olivia Chow’s announcement of a “city-wide push to put our locally-made products and services first” signals a significant shift in municipal priorities that could reshape demand for commercial space2. The city’s review of procurement policies and contracts, with specific consideration of ending contracts with U.S. companies or banning them from future government contracts, creates an environment where Canadian businesses may receive preferential treatment in accessing municipal opportunities2.

This economic nationalism extends beyond government policy to influence consumer behavior and business strategies. As trade tensions escalate, Toronto businesses and residents may increasingly prioritize locally sourced goods and services, potentially benefiting Canadian retailers and service providers operating in mixed-use developments. This shift could create opportunities for domestic businesses to expand their presence in these spaces, potentially filling gaps left by U.S. companies facing higher operational costs or more challenging business conditions due to nationalist sentiment.

For businesses already operating in Toronto’s mixed-use spaces, the economic impact of tariffs is palpable. Industries like plastics, chemicals, and machine tools have reported economic pain, with many unable to absorb the sudden 25% tariff increase—and their American customers unlikely to accept higher prices2. These pressures may force some businesses to downsize their commercial footprints within mixed-use developments or negotiate more favorable lease terms to offset rising operational costs. The resulting volatility in the commercial tenant market could create challenges for mixed-use property owners accustomed to stable, long-term commercial leases.

The Rise of Residential Dominance in Mixed-Use Spaces

As economic pressures mount on commercial tenants, the residential components of mixed-use developments may increasingly become their economic anchors. Several factors support this potential shift toward residential dominance in Toronto’s mixed-use landscape. First, housing remains an essential need regardless of economic conditions, providing more stable demand compared to commercial space that businesses might reduce during economic uncertainty. Second, Toronto continues to face housing challenges, with mixed-use developments identified as potential contributors to addressing the city’s real estate issues1.

The integration of living spaces with retail and service amenities creates particularly attractive residential environments that may command premium prices even amid broader economic uncertainty. The convenience of having shopping, dining, and entertainment options within walking distance becomes even more valuable when economic pressures make transportation costs more significant concerns for households. This enhanced value proposition for residential units in mixed-use developments could help maintain their demand and pricing even as commercial components face greater volatility.

From a developer’s perspective, the relative stability of residential revenue streams compared to potentially more volatile commercial leases makes housing an attractive component to emphasize in future mixed-use projects. New developments may adjust their space allocations to increase the proportion dedicated to residential units while reducing commercial footprints. This shift would represent a significant evolution in Toronto’s mixed-use landscape, which has historically balanced commercial and residential components to create truly integrated urban environments.

Toronto’s Economic Resilience Strategy

In response to these trade challenges, Toronto is developing strategies to enhance its economic resilience and reduce vulnerability to external shocks. This approach involves leveraging the city’s diverse economic base and substantial contribution to national prosperity—generating over a fifth of Canada’s GDP and more than half of Ontario’s GDP3. By focusing on economic diversification and self-sufficiency, Toronto aims to navigate the urban frontlines of this trade war effectively6.

Toronto’s economic action plan emphasizes the importance of collaborative efforts across all levels of government, business, and community stakeholders to ensure broad-based, sustainable prosperity through 2035 and beyond3. This holistic approach recognizes that while the city enjoys advantages such as its highly skilled workforce, world-leading institutions, and diversified economy with multiple globally competitive sectors, it must actively work to maintain these strengths in the face of international economic pressures3.

For mixed-use developments, this economic resilience strategy creates both challenges and opportunities. On one hand, the emphasis on local procurement and Canadian business prioritization may restrict access to certain materials or services, potentially increasing costs or limiting options. On the other hand, the focus on creating a more self-sufficient local economy could generate new business opportunities within these integrated spaces, particularly for Canadian enterprises serving domestic markets.

Future Outlook: Adaptation and Evolution of Mixed-Use Models

Despite the current challenges, the fundamental value proposition of mixed-use developments remains strong, particularly as changing work patterns and consumer preferences continue to favor integrated, walkable urban environments. The rise of work-from-home and hybrid work models has increased the demand for environments that allow people to work, live, and relax all in one place4. This trend supports the continued development of mixed-use spaces, though perhaps with evolving configurations that place greater emphasis on residential components and flexible workspaces rather than traditional office environments.

Mixed-use developments also align with broader sustainability goals by reducing the need for long commutes and supporting environmentally friendly infrastructure like public transit, bike lanes, and green building technologies4. These benefits remain relevant regardless of trade tensions and may even increase in importance if rising costs make transportation more expensive. The environmental advantages of mixed-use developments could help maintain their appeal to both residents and forward-thinking businesses, even amid economic challenges.

The city’s economic action plan, which envisions Toronto as a leader in broad-based, sustainable prosperity through 2035 and beyond, provides a supportive framework for the continued evolution of mixed-use developments3. By emphasizing the importance of creating vibrant, livable urban environments that can drive long-term economic success and growth, this plan reinforces the value of integrated spaces that combine residential, commercial, and retail elements. The plan’s collaborative approach also recognizes that addressing complex economic challenges requires coordination across various stakeholders, including those involved in mixed-use development projects.

Conclusion: Residential Ascendancy in a Transforming Landscape

As Toronto navigates the economic nationalism unleashed by Trump’s trade policies, its mixed-use commercial landscape appears poised for a significant transformation characterized by the growing dominance of residential components. The combined pressures of tariff-induced construction cost increases, shifting tenant dynamics, and municipal economic nationalism create an environment where the stability of residential demand offers a compelling counterbalance to commercial volatility. Future mixed-use developments will likely reflect this reality through adjusted space allocations that emphasize housing while maintaining sufficient commercial elements to provide the amenities and services that make these integrated environments attractive.

This evolution does not signal the end of Toronto’s mixed-use development model but rather its adaptation to changing economic conditions. The fundamental benefits of these integrated spaces—including sustainability advantages, quality-of-life improvements, and economic efficiencies—remain relevant even amid trade tensions. As Toronto pursues greater economic resilience and self-sufficiency, mixed-use developments will continue to play an important role in creating vibrant urban neighborhoods that can withstand external pressures and support broad-based prosperity.

The city’s approach to this challenge will shape not just its physical landscape but also its economic identity. Toronto faces a critical choice between remaining tethered to the economic and political tides of its southern neighbor or asserting itself as a more independent, globally connected city-region. As this dynamic unfolds, we can expect to see mixed-use developments in Toronto commercial real estate evolve to reflect both the economic necessities of the moment and the enduring vision of Toronto as a diverse, sustainable, and prosperous urban center where people can live, work, and thrive in integrated communities—regardless of the trade policies implemented next door.

Citations:

The Downtown Dilemma: Could U.S. Policy Shifts Stall Toronto’s Office Market Recovery?

Toronto commercial real estate Immigration impact

Immigration Slowdown: What Fewer Newcomers Could Mean for Toronto’s Commercial Real Estate Boom

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