Let’s say you find a great office space in Toronto. The listing says $22 per square foot. You do the math on a 500-square-foot unit and land on roughly $917 a month. That sounds manageable. You’re ready to sign.
Not yet.
That $22 is the base rent — the starting point, not the finish line. What shows up in your first invoice will likely look quite different from what you saw in the listing. And the costs you pay before moving in at all can run into the tens of thousands of dollars.
This isn’t a gotcha article. Commercial leasing has legitimate value for the right businesses at the right stage. But for many small and mid-sized businesses in Toronto, the full cost picture isn’t clearly laid out until after a deal is done. This post attempts to fix that.
Start With the Right Number: Net Rent Is Not Your Rent
In Toronto’s commercial real estate market, office space is almost always quoted in net rent per square foot. Net rent is the base amount that goes to the landlord for the space itself. It is not your total monthly payment.
On top of net rent, commercial tenants in Ontario typically pay what’s called TMI — Taxes, Maintenance, and Insurance. This is the tenant’s proportionate share of the building’s operating costs: property taxes, building insurance, common area maintenance, snow removal, HVAC maintenance, janitorial services for shared areas, and more. TMI is billed in addition to base rent and can fluctuate year to year based on actual building expenses.
According to Avison Young’s Q2 2025 GTA market data, the average additional rent (TMI) across GTA office buildings equalled approximately 58% of the net asking rent. On a $22/sq ft net rent, that’s roughly $12.76 in TMI — bringing your effective gross rent closer to $34.76 per square foot before HST.
TRREB’s Q4 2025 commercial report recorded the average GTA office net lease rate at $22.23 per square foot, up from $18.74 in Q4 2024 — a 19% year-over-year increase. That’s the net rate. Add TMI and HST and you’re looking at a very different monthly number than what first appeared in the listing.
Sources: Avison Young Q2 2025 GTA Office Report; TRREB Commercial Market Report Q4 2025
There is also 13% HST applied to the full commercial rent payment (base rent plus TMI) in Ontario. Residential tenants don’t pay HST on rent. Commercial tenants do. This is a meaningful and frequently overlooked line item.
Before You Move In: The Upfront Cost Stack
The monthly rent conversation tends to dominate lease negotiations. The upfront cost conversation often doesn’t happen at all — until the bills arrive.
Here’s a realistic breakdown of what a small business signing a commercial office lease in Toronto typically faces before the first day of operations:
1. Security Deposit
Ontario’s Commercial Tenancies Act does not cap security deposits — unlike residential leasing, there is no statutory limit. Market practice for commercial office leases in Ontario typically runs one to three months’ gross rent (base + TMI), though some landlords require more, particularly for newer businesses without established credit.
On a 500-square-foot office at $35/sq ft gross, that’s a deposit of roughly $1,458 to $4,375 per month. Three months’ deposit on the same space: $4,375 to $13,125. For larger spaces or longer terms, the deposit requirement scales accordingly.
Source: Landager, Ontario Commercial Security Deposits Guide, April 2026; Frank Feldman Law, Commercial Lease Agreements in Ontario, April 2025
2. Legal Fees for Lease Review
A commercial lease in Toronto is not a standard form document. It is a negotiated contract, often 30 to 60 pages, drafted by the landlord’s lawyers in the landlord’s favour. Having a lawyer review it before signing is not optional for any business that wants to understand what it’s committing to.
Toronto commercial real estate lawyers typically charge $1,500 to $3,500 for a standard lease review, with complex or lengthy leases running higher. Lease negotiation, if required, adds to that cost. Skipping the legal review to save money is widely described by Ontario commercial lawyers as one of the most expensive mistakes a new business tenant can make — because the cost of a clause you missed is almost always higher than the cost of catching it.
Source: Insight Law Firm, Real Estate Lawyer Fees in Toronto, January 2025; LawyerInfo.ca, Commercial Lease Agreement Ontario, March 2026
3. Fit-Out and Furniture
Unless you are moving into a fully furnished, move-in-ready space, a commercial lease typically means a raw or semi-improved unit. Depending on the condition of the premises, you may need to budget for flooring, painting, partitioning, lighting upgrades, IT infrastructure, and furniture.
Fit-out costs vary enormously by scope, but for a small professional office in Toronto, basic improvements and furniture can run $10,000 to $50,000 or more. Some landlords offer a tenant improvement (TI) allowance to offset these costs — but TI allowances are negotiated, not standard, and are typically available only on longer leases in buildings with existing vacancies. In 2026’s tightening Toronto office market, landlord leverage on TI has increased.
Source: CBRE Canada Office Figures Q1 2026; CommercialLeaseCost.com Q1 2026 Benchmarks
4. Moving Costs and IT Setup
Relocating equipment, coordinating IT infrastructure, phone systems, and internet setup adds another layer of cost that is easy to underestimate. Professional movers for a small office typically run $1,500 to $5,000 depending on volume and distance. IT setup — installing network infrastructure, configuring systems, and managing the cutover — adds additional time and cost that varies by business type.
5. The Broker Commission: Who Pays, and Why It Still Matters
Tenant representation brokers in Toronto are almost always paid by the landlord, not directly by the tenant. The commission — which according to CCIM fee guidelines typically runs 4% to 6% of the total gross lease value — is split between the landlord’s listing broker and the tenant’s representative.
This is frequently misunderstood. Because the tenant doesn’t write a cheque for the commission, it’s easy to assume it’s free. But broker commissions are baked into the deal economics. A landlord pricing space for lease is pricing it knowing they will pay the commission. A tenant who negotiates directly without a broker does not automatically capture that saved commission as a concession — in most cases, the listing broker simply keeps the full fee. The money doesn’t disappear; it just moves differently.
On a five-year lease for 500 square feet at $35/sq ft gross, the total lease value is roughly $1,050,000. A 5% commission on that is $52,500 — absorbed somewhere in the deal structure, whether or not the tenant ever sees it as a line item.
Sources: CCIM Fee Guidelines; Metrobi, Standard Commission for a Commercial Lease, February 2026; Rokos Advisors, How Your Tenant Rep Broker Is Paid
The Cost Summary Table
Here’s how those upfront costs stack up for a realistic small-office scenario — 500 square feet, $22/sq ft net rent, $12/sq ft TMI, in the GTA:
| Cost Item | Estimated Range | Notes |
| Security deposit | $6,000 – $18,000 | 1–3 months base + TMI |
| Legal fees (lease review) | $1,500 – $3,500 | Ontario commercial standard |
| Fit-out / furniture | $10,000 – $50,000+ | Depends on condition of space |
| Moving costs | $1,500 – $5,000 | Professional movers, IT setup |
| TMI add-on (annual) | $8 – $16 per sq ft | Avison Young Q2 2025 GTA avg |
| HST on rent | 13% of base + TMI | Applied to full commercial rent |
| Broker commission (indirect) | 4–6% of total lease value | Paid by landlord; baked into deal |
| Estimated move-in cost (small office, 500 sq ft) | $20,000 – $75,000+ before first month of work | |
Note: Figures are estimates based on GTA market data as of Q1–Q4 2025 and Q1 2026. Actual costs vary by building class, location, lease term, and negotiated terms.
What a 3-Year Lease Actually Commits You To
The minimum commercial lease term in Toronto is typically one year, but three to five years is far more common — particularly in purpose-built office buildings. Shorter terms are available in some buildings, but they usually come with higher per-square-foot rates and reduced TI.
A three-year lease on 500 square feet at $34.76/sq ft gross (net + TMI, pre-HST) equals roughly $62,568 in rent payments before tax over the term. Add 13% HST and you’re at approximately $70,702 in total rent payments alone.
That commitment is binding. Unlike a residential lease, Ontario commercial tenants have very limited statutory exit rights. If your business needs change — if you grow and need more space, or contract and need less, or simply need to close — breaking a commercial lease early means negotiating with the landlord, finding a subletter, or facing legal liability for the remaining rent. There is no Landlord and Tenant Board for commercial disputes; resolution happens through civil court.
This isn’t an argument against commercial leases. For businesses with stable headcounts, established cash flow, and genuine long-term space needs, a traditional lease can still be the right financial decision. But it is a commitment that needs to be entered with full knowledge of what breaking it looks like.
Source: Mondaq / Pacific Legal, Commercial Leasing in Ontario, June 2025; UL Law, Commercial Lease Agreements Ontario, March 2026
What the Alternative Actually Looks Like
For businesses that don’t need the full commitment of a commercial lease — whether because they’re growing quickly, uncertain about headcount, or simply don’t want to tie up $20,000 to $75,000 before their first day in the office — managed private offices in business centres offer a meaningfully different cost structure.
The key differences:
- No TMI exposure. The monthly rate is all-in, covering operating costs, utilities, and building maintenance without year-end reconciliation surprises.
- No fit-out cost. Fully furnished and move-in ready means the space is operational from day one.
- Minimal deposit. Managed workspace deposits are typically one month’s rent rather than three, and conditions for return are clearly defined.
- No legal fees. A managed workspace agreement is not a commercial lease and doesn’t require a lawyer to review before signing.
- Shorter terms with real exit options. Month-to-month and 12-month plans exist in the same building, giving businesses flexibility that commercial leases structurally don’t offer.
The trade-off is real: a managed private office will typically cost more per square foot than a raw net rent on a traditional lease. That comparison is somewhat misleading, though, because net rent is not your total cost — as this post has laid out at length. When you account for TMI, fit-out, legal fees, deposit, and HST, the managed workspace’s all-in monthly rate often compares more favourably than the per-square-foot numbers suggest at first glance.
The fairer comparison isn’t net rent per square foot vs. managed office monthly rate. It’s total cost of occupancy, from day one of the lease through the end of the term, including everything you paid before unlocking the door.
A Note on Who Should Still Consider a Traditional Lease
None of this is to say that commercial leases are the wrong choice. There are businesses for which they make clear sense:
- Businesses with stable, established headcounts that won’t change significantly over three to five years.
- Companies that need a large footprint, specific buildout requirements, or branded, customized space that a managed workspace can’t provide.
- Organizations with the capital and legal resources to manage a lease agreement properly.
- Businesses where a specific building or address is a genuine strategic asset, not just a preference.
For everyone else — the growing startup, the established small practice, the international company setting up a GTA presence, the professional who needs a credible base without a long-term anchor — the full cost picture of a commercial lease is worth understanding before assuming it’s the obvious choice.
Where to Start If You’re Exploring Your Options
S3PACE Business Event Center in North York offers private offices on both month-to-month and 12-month terms, fully furnished and move-in ready, with all costs included in a single monthly rate — no TMI reconciliation, no fit-out budget, no lease lawyer required. Offices are available across a range of sizes, and the building includes free onsite parking, reception services, and access to conference rooms, coworking floors, and a café lounge.
If you’d like to compare your current or projected commercial lease costs against what a private office at S3PACE would actually cost your business, we’re happy to walk through the numbers with you.
📍 205 Placer Ct, North York, Toronto 📞 416-998-0808 📧 info@s3pace.ca
Written by the S3PACE team.
