Downtown Toronto experienced a second consecutive quarter of strong office leasing activity in the fall of 2025, making it the most clear-cut example of generally positive trends in major Canadian markets. Newly released stats from CBRE Canada peg the national office vacancy rate at 18 per cent, down 70 basis points (bps) from year-end 2024, following 12 months that saw 1.3 million square feet of net positive absorption averaged across the 10 regional markets the firm surveys.
Nationally, the pandemic-triggered glut of sublease space shrank by 3.2 million square feet and now equates to less than 13 per cent of total vacant space, down from a 15.7 per cent share in December 2024. As well, the new construction pipeline dwindled to its nearly final spurts; average Class A net rent rose by $0.35 per square foot (psf) to $26.10; and the gap between downtown and suburban vacancy tightened by 50 bps, with downtown office making most of the gains.
CBRE Canada’s managing director of research, Marc Meehan, reads it all as signs of an office market recovery, albeit one that is uneven across Canadian markets and concentrated in Class AAA and A stock. “We have worked through the bulk of the office decisions that had been delayed by the pandemic and increasingly office leasing activity is reflective of economic growth and talent availability, with Toronto benefiting most from the corporate commitments to office space at this stage of the recovery,” he maintains.
Six of 10 surveyed Canadian markets recorded net positive office absorption last year, but Toronto was the major contributor to the national total. It saw the uptake of more than 2.6 million square feet of additional space, with almost all of that occurring downtown and nearly 1.2 million square feet absorbed in the fourth quarter alone. Elsewhere, positive absorption ranged from 261,000 square feet in Montreal to 29,000 square feet in London, Ontario, while roughly an additional 500,000 square feet of office space was returned to the market in Ottawa and Calgary during the year.
Downtown Calgary suffered the biggest blow, with an extra 915,000 square feet becoming available, but that was partly counterbalanced with 400,000 square feet of positive absorption in the suburbs. A similar scenario played out in Vancouver, where about 441,000 square feet of new uptake in the suburbs made up for an extra 343,000 square feet emptying out downtown, allowing for 98,000 square feet of overall positive absorption. Meanwhile, Ottawa saw more space returned to the market both downtown (168,000 square feet) and in the suburbs (330,000 square feet), pushing the vacancy rate up 80 bps year-over-year, to hit 13.2 per cent in December 2025.
CBRE analysts attribute those outcomes to: “tenant consolidation and downsizing” within Vancouver’s downtown trophy assets; energy sector mergers and layoffs that have reduced staffing in Calgary’s downtown towers; and ongoing general malaise in the Ottawa market. However, in the latter case, pending “greater clarity on the federal government’s portfolio strategy” is expected to potentially improve the outlook for 2026, and Ottawa’s downtown Class A market is still one of the fullest in Canada, with a 13.5 per cent vacancy rate.
Nationally, the Class A vacancy rate now sits at 16.4 per cent — a 130-bps decrease from 17.7 per cent at year-end 2024. However, the downtown Class A vacancy rate took a steeper decline, with a 170-bps drop, from 17.1 to 15.4 per cent, over the 12-month period. Downtown Class A vacancy hovers well below the national average in Vancouver (9.3 per cent), Toronto (12.1 per cent) and Montreal (14.2 per cent), while prime space in downtown Calgary loosened 70 bps over the course of 2025 to close out the year at 25.6 per cent vacant.
The same trends play out in average net rents, with downtown Class A space commanding $43.99 psf in Vancouver, $35.02 psf in Toronto, $25.52 psf in Montreal and $24 psf in Calgary. The differential with suburban rents is narrowest in Calgary, where the average suburban Class A net rent is pegged at $20 psf, and most pronounced in Toronto, where Class A suburban net rents average $19.44 psf.
More broadly across downtown office stock, the average vacancy in buildings categorized as “trophy assets” is pegged at 10.4 per cent — 1,500 bps lower than the average vacancy rate for Class B and C office, at 25.4 per cent. Looking to imminent future trophy assets, the last major project in Toronto’s downtown construction pipeline — the fully pre-leased, 1.5-million-square-foot CIBC Square II — is due to be completed in 2026. That follows after just 53,000 square feet of new supply came onto Toronto’s downtown market in 2025.
Elsewhere, the vast majority of in-progress projects are small scale and suburban. That includes: 565,000 square feet in Vancouver; 200,000 square feet in Toronto; 80,000 square feet in Halifax; and less than 50,000 square feet in each of Ottawa, Winnipeg, Calgary and Waterloo, Ontario. Projects commenced in 2025 amount to just 83,000 square feet of this tally, representing a record low in national office construction starts.
“Due to limited starts, the pipeline of new supply is expected to remain constrained,” CBRE analysts observe. “With no meaningful new supply deliveries on the horizon beyond 2026, demand is expected to trickle down to the next-best product tiers.”
