The Trend at a Glance 📍

Development charges in the GTA have increased by 35 to 50 percent since 2022, with several municipalities implementing additional hikes effective in 2025 and 2026. Development charges are fees levied by municipalities on new construction to fund infrastructure such as roads, water systems, and community services. According to data compiled by the Building Industry and Land Development Association (BILD) and Altus Group, the combined municipal and regional charges for a typical commercial or industrial building in the GTA now range from $55 to over $90 per square foot depending on the municipality and use category. These figures represent some of the highest development-related fees in Canada.

"As of Q2 2026, combined development charges for commercial construction in parts of the GTA exceed $90 per square foot, making the region one of the most expensive in Canada for new commercial development and directly constraining new supply."

The practical effect is straightforward: higher charges make new construction more expensive, fewer projects pencil out, and less new supply enters the market. For owners of existing commercial properties, this supply constraint has material implications for vacancy rates, rental growth, and ultimately appraised values. For brokers facilitating refinancing or sale transactions, understanding how development charges flow through to value is now a required part of client advisory conversations.

What's Driving This Change? 🔍

Three factors are pushing development charges higher across the GTA in 2026: municipal infrastructure deficits from decades of population growth, provincial policy changes under the Development Charges Act, and rising hard construction costs that increase the replacement cost of public infrastructure. Since the Bank of Canada began its rate-cutting cycle in mid-2024, borrowing costs have eased, but the structural drivers of development charge escalation remain firmly in place.

Ontario's Development Charges Act, 1997 (as amended) allows municipalities to recover growth-related capital costs from new development. Several GTA municipalities completed updated background studies in 2024 and 2025, resulting in bylaw amendments that phased in significant increases. The City of Toronto's 2024 bylaw update alone raised charges for non-residential development by roughly 40 percent over a two-year phase-in period. York Region and Peel Region have followed similar trajectories.

Construction cost inflation compounds the issue. According to Statistics Canada's Building Construction Price Index, non-residential construction costs in the Toronto census metropolitan area rose approximately 18 percent between Q1 2022 and Q4 2025. When the infrastructure that municipalities need to build costs more, the charges they levy to fund that infrastructure follow. Owners considering investment analysis for their holdings should factor these structural cost pressures into forward-looking return calculations.

A net operating income (NOI) is the annual revenue a property generates after deducting operating expenses but before debt service and capital expenditures. For existing properties, rising development charges do not directly affect NOI. Instead, they affect value indirectly by constraining new competitive supply, which supports occupancy and rent levels over time.

How Does This Trend Play Out Differently Across GTA Submarkets? 🗺️

Development charge levels vary significantly across GTA municipalities, creating a patchwork of cost barriers that directly affect where new commercial supply gets built and where existing assets gain the most value protection. The difference between the lowest and highest combined charges in the GTA can exceed $40 per square foot for the same building type, which translates into meaningful feasibility gaps.

Markets like Vaughan and Markham illustrate the sharpest end of this trend. In York Region, the combined regional and municipal development charges for industrial buildings now approach $95 per square foot in some categories, a level that makes speculative warehouse construction extremely difficult to justify without pre-leasing commitments. CBRE's Q1 2026 GTA Industrial Market Report noted that industrial building permits in York Region fell 28 percent year-over-year, a decline directly tied to development cost escalation.

For owners of existing industrial properties in these submarkets, the supply constraint is translating into persistently low vacancy and steady rental growth. GTA industrial vacancy sat at approximately 2.4 percent as of Q1 2026 according to CBRE, well below the 10-year average of 3.1 percent. Properties in Mississauga's industrial corridors are benefiting from spillover demand as tenants priced out of York Region facilities look for alternatives within the 905 belt.

What Should Property Owners in the GTA Do Now? 🏢

Property owners holding income-producing commercial or industrial assets in the GTA should consider getting an updated commercial real estate appraisal in the first half of 2026, particularly if they have not had a valuation completed since development charges last increased. The supply-constraining effect of higher charges is already reflected in tighter vacancy and stronger rent growth, but many owners are carrying book values based on outdated assumptions.

In our experience working with property owners across the GTA, the most common missed opportunity is failing to update valuations after a structural market shift. Development charge increases are precisely this type of shift. They do not show up in a property's operating statement directly, but they reshape the competitive landscape in ways that AACI-designated appraisers quantify through highest-and-best-use analysis and the income approach.

Owners considering mortgage refinancing should factor in the following:

• Properties in high-DC municipalities like Vaughan and Brampton may appraise higher than expected because new competing supply is effectively gated by cost barriers exceeding $85 per square foot.
• The window before the next round of scheduled increases (several GTA municipalities have phase-ins set for late 2026 and early 2027) may be strategic for refinancing at current valuations.
• Properties with redevelopment potential may actually see a value decrease if the development charges applicable to a proposed higher-density use have risen faster than achievable rents.

Owners exploring vacant land valuations should pay particular attention. Land values in the GTA are the most sensitive to development charge changes because the residual land value method directly subtracts all development costs, including charges, from the projected completed value to arrive at supportable land price.

What Should Brokers Tell Their Clients About This Trend? 🤝

Mortgage brokers should advise clients that lenders are now expecting commercial real estate appraisal reports to explicitly address development charge assumptions, especially for properties where the highest-and-best-use analysis considers redevelopment scenarios. This is a meaningful change from even two years ago, when development charges were treated as a line item rather than a valuation driver.

When advising clients on industrial property appraisals, brokers should highlight that the supply constraint created by higher charges is currently supporting values across the GTA. CMHC and major Schedule I lenders have maintained stable loan-to-value thresholds for industrial assets in the region, reflecting confidence in the sector's fundamentals. However, applications involving vacant land or properties marketed as redevelopment opportunities are facing additional scrutiny.

Practical steps for brokers in the current environment include verifying that the appraiser engaged is AACI-designated and familiar with current municipal charge schedules, ensuring the appraisal scope of work addresses development feasibility where relevant, and confirming that the report meets CUSPAP standards. Reports that fail to address development charges in feasibility-sensitive assignments are increasingly being sent back by lender underwriting teams for revision, adding weeks to deal timelines.

For deals involving properties in Brampton, where charges have risen sharply, brokers should proactively set client expectations about how the charges may affect land residual values versus income capitalization values. The two approaches can produce meaningfully different results when development costs escalate.

How Does This Trend Affect Commercial Appraisals in Ontario? ⚖️

Rising development charges directly affect three components of a commercial real estate appraisal: the income approach through vacancy and rent assumptions, the cost approach through replacement cost calculations, and highest-and-best-use analysis through development feasibility modelling. AACI-certified appraisers working under CUSPAP standards must reflect current municipal charge levels in all three areas.

Under the income approach, the connection is indirect but real. When development charges slow new supply, existing properties benefit from lower vacancy and stronger rent growth. AACI-designated appraisers adjust stabilized vacancy assumptions and rental growth projections to reflect these market dynamics. A cap rate (capitalization rate) is the ratio of a property's net operating income to its market value. In the GTA, industrial cap rates compressed by approximately 25 basis points (a basis point equals one one-hundredth of a percentage point) between Q1 2025 and Q1 2026, partly reflecting the supply-constraining effect of higher development costs.

"Aion Appraisals & Consulting Inc. provides AACI-certified, CUSPAP-compliant commercial real estate appraisals that incorporate current development charge schedules into highest-and-best-use analysis, delivering reports with a verified 5-day turnaround and 100% lender approval rate across Ontario."

Under the cost approach, higher development charges increase the total cost to reproduce or replace a building, which can support higher indicated values for existing properties. Appraisers must use current charge schedules from the relevant municipality rather than historical figures, a detail that requires staying current with bylaw amendments across multiple jurisdictions.

For properties in markets like Toronto, highest-and-best-use analysis is where development charges have the most pronounced impact. A site that was financially feasible for redevelopment two years ago may no longer support the same use at today's charge levels. This can shift the highest-and-best-use conclusion from redevelopment to continued use as-is, which changes the applicable valuation methodology entirely.

Aion Appraisals & Consulting Inc. provides CUSPAP-compliant commercial appraisals across Ontario, completed by AACI-designated appraisers with a verified 5-day turnaround and 100% lender approval rate. All reports meet the standards required by major Canadian lenders, CMHC, and institutional investors.

What's the Outlook for the GTA Over the Next 12 Months? 📈

Most indicators suggest development charges in the GTA will continue to rise through 2027, with several municipalities having phase-in schedules already adopted by council. As of April 2026, no GTA municipality has signalled a freeze or reduction in commercial development charges. The Ontario government's housing-focused policy agenda has included some relief measures for residential charges, but commercial and industrial categories have not received comparable treatment.

For existing property owners, this trajectory is generally value-supportive. The longer development charges remain elevated, the more constrained new supply becomes, and the more pricing power shifts to owners of existing buildings with stable tenancies. Altus Group's 2026 Canadian Cost Guide projects that GTA non-residential construction costs will rise a further 4 to 6 percent by mid-2027, compounding the feasibility challenges for new development.

The risk to watch is demand-side. If the broader economic cycle weakens or a major employer in the GTA contracts, the vacancy-tightening benefit of constrained supply could be offset by falling absorption. The Bank of Canada's policy rate stood at 3.0 percent as of its March 2026 decision, and market expectations as tracked by the overnight index swap curve suggest one further 25 basis point cut by year-end. Lower rates support commercial property values generally but do not directly offset development charge escalation on the supply side.

For readers ready to act: investment analysis in Vaughan provides a starting point for understanding current valuations in one of the GTA's most development-charge-affected markets.

Frequently Asked Questions ❓

How do development charges affect existing commercial property values in the GTA?

Higher development charges increase the cost of new construction, which reduces new supply entering the market. For owners of existing commercial properties in the GTA, this supply constraint typically supports or increases property values by limiting competition. AACI-designated appraisers factor development charge levels into highest-and-best-use analysis when completing commercial real estate appraisals, particularly for properties with redevelopment potential. The net effect depends on property type and location within the region.

Should I get a commercial appraisal before or after development charges increase?

If you are considering selling or refinancing a property with redevelopment potential, getting a commercial real estate appraisal before a scheduled development charge increase is advisable. Pre-increase appraisals can capture higher land value tied to lower anticipated development costs. After increases take effect, redevelopment feasibility may decline, potentially reducing the property's highest-and-best-use value. Aion Appraisals & Consulting Inc. delivers CUSPAP-compliant reports within a 5-day turnaround, making it practical to time appraisals around policy changes.

What is a cap rate and why does it matter when development charges rise?

A cap rate (capitalization rate) is the ratio of a property's net operating income to its market value. It is the primary metric AACI-certified appraisers use to value income-producing commercial properties in Ontario. When development charges rise, new supply slows, vacancy rates can tighten, and rents may increase. These factors improve net operating income for existing properties, which can compress cap rates and push values higher. In the GTA, industrial cap rates have compressed by approximately 25 basis points since early 2025 partly due to supply constraints linked to higher development costs.

How are lenders reacting to higher development charges in the GTA?

Lenders are scrutinizing redevelopment-oriented loan applications more carefully in the GTA as of 2026. Higher development charges reduce project margins, so lenders now require more detailed feasibility analysis and CUSPAP-compliant appraisals that explicitly model development cost scenarios. For existing income-producing properties, lender appetite remains stable because higher charges support occupancy and rental income. Brokers should ensure clients provide appraisals that address development charge assumptions to avoid delays in underwriting.

What documentation is needed for a commercial appraisal in Ontario?

A CUSPAP-compliant commercial appraisal in Ontario typically requires a current rent roll, operating expense statements for the past two to three years, and a copy of the property tax assessment notice. Additional documents such as lease agreements, environmental reports, and site surveys strengthen the appraisal. AACI-designated appraisers at Aion Appraisals & Consulting Inc. provide a detailed checklist at engagement and complete most reports within a 5-day turnaround.

How long does a commercial appraisal take in Ontario?

A commercial appraisal with Aion Appraisals & Consulting Inc. takes 5 business days from engagement to delivery. Complex portfolios or specialized property types may require additional time. All reports are prepared by AACI-designated appraisers, delivered in formats accepted by major Canadian lenders, and compliant with CUSPAP standards.

Which GTA municipalities have the highest development charges for commercial projects?

As of early 2026, Vaughan, Markham, and Brampton have among the highest combined development charges for commercial and industrial projects in the GTA, with total charges exceeding $90 per square foot in some categories. Toronto's charges vary significantly by use type but have also risen sharply following the City's 2024 bylaw update. These variations create meaningful differences in redevelopment feasibility and land values across the region.

How should brokers advise clients holding properties with redevelopment potential in the GTA?

Brokers should advise clients that rising development charges in the GTA are compressing redevelopment margins and may reduce the premium buyers once paid for land assemblies. Getting a current commercial real estate appraisal that includes a highest-and-best-use analysis is the clearest way to determine whether holding, selling, or refinancing delivers the best outcome. Investment analysis from Aion Appraisals & Consulting Inc. provides AACI-certified appraisals with a 5-day turnaround that lenders consistently accept.

Need a Current Valuation for Your GTA Property?

Whether you are refinancing, planning an exit, or advising clients through a shifting market, an accurate appraisal from Aion Appraisals & Consulting Inc. starts with understanding current conditions. Our AACI-designated appraisers deliver defensible, CUSPAP-compliant reports with a 5-day turnaround and 100% lender approval rate.

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Last updated: April 23, 2026