Office and industrial markets are still exhibiting contrasting fortunes, but there’s a new skew to the up and down trends in Canada’s major urban centres coming out of the third quarter of 2025. Colliers Canada reports dropping vacancy rates in 10 of the 12 office markets it surveys — including Vancouver, Calgary, Toronto and Montreal — while only Vancouver and Regina experienced tightening industrial inventory.
The national office vacancy rate nudged down to 14.4 per cent as return-to-office mandates kicked in in the financial, insurance and government sectors. Meanwhile, the national industrial vacancy rate inched up for the fourth consecutive quarter, to reach 3.7 per cent, and the average net asking rent declined for the third consecutive quarter, dipping to $15.09 per square foot (psf).
Colliers analysts forecast strong future demand for downtown office space, although, for now, it is still 350 basis points (bps) looser than suburban office markets on a national basis. Montreal is the sole surveyed market where downtown office space is tighter than in the suburbs, but much of Toronto’s downtown glut is attributed to Class B and C stock, while the vacancy rate in AAA stock shrank by 170 bps, dropping to 4.4 per cent, during the quarter.
“Toronto’s office market has shifted from a flight-to-quality to a fight-for-quality,” Colliers analysts theorize. “Office tenants are favouring renewals over relocations due to lower net effective rents, reduced inducements and limited higher quality options.”
That’s seen in a decrease in the average net asking rent for office nationally, which slipped to $21.70 over the course of Q3. Average net asking rent decreased in Vancouver, Toronto and Montreal, but made gains to reach $17.57 psf in Calgary. Vancouver continues to command the highest average net asking rent among the markets, at $33.68 psf, followed by Toronto, at $25.25 psf.
About 2.4 million square feet of new downtown office space is still under construction Canada-wide, with about 92 per cent of that pipeline in Toronto. There is also slightly more than 1.5 million square feet of new suburban office in progress, predominantly found in Vancouver.
The industrial pipeline still holds 21.5 million square feet of pending space in a year when more than 20 million square feet of new space has already come onto the market across Canada. In the global perspective, Colliers analysts reiterate that Canada’s industrial vacancy remains low. Toronto boasts the tightest inventory, with a 2.9 per cent vacancy rate, among the four largest markets. That’s followed by Vancouver at 3.4 per cent, Calgary at 4.1 per cent and Montreal at 5.1 per cent.
Average net asking rents decreased compared to Q2 in all surveyed markets except Saskatoon and Victoria. Vancouver is still commanding the highest, translating to an net average of $19.82 psf.
In that city, Colliers analysts theorize landlords are aiming to “maintain occupancy and preserve steady income streams, while waiting for a recovery in long-term leasing demand”. In Toronto, it’s suggested “market sentiment is improving” as some industrial growth is expected in the mid-term “next few years”.
“Tariff talks are taking a backseat as decision-making can no longer be delayed,” Colliers analysts state.
