Automotive repair shops are finding it difficult to open new locations across Greater Toronto as some landlords say they're hesitant to lease space for auto-repair facilities due to environmental concerns and potential property degradation.
Also, having an auto repair and services shop as a long-term tenant can affect an owner's ability to sell its properties, said Monty Sharma, a broker with Lennard Commercial Realty who specializes in the industrial sector.
“Once you have an automotive tenant and they’ve been there for a while, if you want to eventually sell the building, there are definitely environmental concerns,” Sharma told CoStar News. “If I had a client who wanted to buy an auto facility, like a car lot or perhaps even a collision centre, we’d have to do due diligence about the environmental impacts."
While some property owners remain open to the idea, Sharma said, auto shops could affect a landlord’s ability to attract other tenants with businesses offering services that are considerably different.
“It really boils down to the environmental component,” he said. Property damage can occur from leaking oil, antifreeze and solvents and from improper disposal of hazardous materials.
This conundrum for landlords comes as overall demand softens and vacancy rates rise, putting more pressure on landlords seeking tenants.
Landlord rejects leases
Alex Marion, a landlord of several Toronto-region industrial properties and owner of A.L. Plastics, said he has received and rejected at least 10 inquiries in the past nine months from tenants looking to open auto shops.
Marion said there’s some skepticism among commercial landlords when considering auto-related leases because, at times, what’s supposed to be a used-car dealership turns into an automotive repair shop replete with the kind of environmental degradation that can ultimately harm a property’s resale value.
“I can tell you horror stories," Marion said in an interview. "They’ll tell you they need an area to change tires or fix brakes, so they want to put up one hoist. Then it becomes having a place to change oil or other fluids, so you end up with contamination to the property. They tell you it’s a dealership, but really, it’s an auto shop."
Marion said some prospects are outfits that buy damaged cars for low prices at auctions and fix them up in their shops. "I don’t even entertain these conversations because, if I eventually sell the property, who’s going to buy it?” he said.
The Automotive Industries Association of Canada told CoStar News it promotes best practices for the auto care industry, valued at an estimated $43.9 billion nationally, but it doesn't police environmental standards.
“AIA Canada members are independent businesses and are expected to comply with all applicable regulations in their jurisdictions,” AIA Canada spokeswoman Emily Reed said in an email. ”While we encourage adherence to all legal and regulatory requirements, AIA Canada does not oversee or enforce compliance.”
Older cars spark demand for repairs
Despite leasing demand for industrial having softened the past couple of years, Spear Realty broker Frank Tullio said he fields calls “almost every other day” from prospective automotive tenants. One reason business at auto shops has increased and created demand for more space is that new cars have become enormously expensive, and younger Canadians are holding onto cars longer, Tullio said. As cars age, they typically need more repairs.
Moreover, a report from global credit bureau Equifax found that one in 20 Canadians aged 18-35 missed credit payments during the third quarter of 2025. The report also noted that non-mortgage delinquency in Toronto reached 2.27%, up 19.58% year-over-year.
Missing credit card and other loan payments typically results in lower credit scores, and that could impact a car buyer's ability to finance the purchase of a new automobile and require them to hang onto an older car longer.
“Not only is it harder for younger people to upgrade cars, but there’s also more traffic on the road, meaning their cars are idling on highways or gridlocked city streets longer and need repairs more often than they might have used to,” Tullio said in an interview. “And imagine how expensive buying an EV or hybrid would be.”
With business growing, some auto shops are seeking larger spaces, Tullio said.
“Their model has changed because every mechanic now wants to also sell cars,” Tulio said. “They’re going to get their own fit for the front [of the shop space] so they can sell cars out of there."
When the semiconductor shortage in 2022 led to a spike in used-car prices, Tullio said he received more inquiries from prospective automotive shops. However, given how strong the demand for industrial real estate was at the time, landlords typically leased their available spaces to tenants in other businesses.
At year-end 2023, the Toronto market's industrial vacancy rate stood at 1.78%, according to CoStar data. It is now 4.3%.
Still, with the Toronto market's industrial vacancy rate rising, Tullio said some landlords at least will entertain calls from auto shops and dealerships. He has advice for landlords considering such leasing prospects.
“If you’re considering it, look at the state of their current shop, whether they have a good name and good reputation, and especially whether they follow all the environmental rules — in those cases, if I were a landlord, I’d definitely consider it,” Tullio said.