Companies readying for a shift away from remote staff have spurred an office leasing resurgence in some cities and economic sectors. Most noticeably, CBRE Canada reports 1.6 million square feet of positive absorption in Toronto during the third quarter of 2025, primarily occurring in downtown Class A space. Drilling deeper, Altus Group pegs the availability rate for premium downtown office space in Class AAA buildings at 7.9 per cent, down from 10.6 per cent about a year ago.
“A lot of the activity that we’re seeing right now is facilitating back-to-the-office. It’s banks and other organizations that are trying to accommodate employees who are coming back because of company mandates,” Ray Wong, vice president of research and data analysis with Altus Group, reported during an online presentation last week. “We’re seeing some competition among some of these tenants for securing the space, and certain firms being outbid for certain locations. We’re definitely seeing a decrease in tenant inducements.”
After 2.3 million square feet of new office supply came onto the downtown Toronto office market in 2024, just 53,000 square feet has arrived thus far this year. Large blocks of contiguous space are becoming rarer in AAA buildings, where the direct vacancy rate is now 1.6 per cent (down from a high of 4.1 per cent in Q1 2022). Wong speculates the next tier of Class A space “that is slightly less amenitized compared to the triple-A” could be positioned to gain from a leasing uptick that’s expected to continue into 2026 given that many employers, including the Ontario government, have set a January start-date for required five-day-a-week office presence.
That said, 1.86-million square feet of office space is still under construction in downtown Toronto and he predicts a shortage of Class AAA space is at least three to five years in the future. Nor is the return of remote staff reflective of companies in growth mode. If anything, Peter Norman, vice president and economic strategist with Altus Group, hypothesizes it’s a symptom of economic uncertainty.
Clash of agendas
“When the labour market is weak like it is right now with high unemployment, that’s when we’re going to see more work-in-office mandates. When labour markets get tight again, which they will pretty quickly, that’s when we’re going to see more flexibility,” Norman said during the Altus online overview of 2025 market conditions.
Illustrative of some employees’ preferences, the central employee relations committee (CERC) of the Ontario Public Service Union has filed an application with the Ontario Labour Relations Board to challenge the provincial government’s return-to-office mandate, arguing that it is “premature” and violates the collective agreement. The committee is also encouraging workers to file individual grievances.
“CERC wants to be clear: we do not support this mandate! It is disruptive, inequitable and dismissive of the proven success of remote and hybrid work models that OPS members have managed effectively for years,” a recent statement declares.
Meanwhile, a majority of recent survey respondents (57 per cent) support the federal government’s hybrid approach that requires non-executive employees to spend at least three days per week in the office and executives to be on-site at least four days per week. Those results are gleaned from roughly 1,900 respondents the Angus Reid polling firm surveyed in July 2025, which included a mix of workers in the private, public and not-for-profit sectors.
“On the issue of a full return to office for federal workers, there appears to be differences of opinion among those who have experience working from home, and along generational and gender divides,” the accompanying analysis observes. “Those who have some experience working from home are more likely to be opposed (64 per cent) than those who have never done so (47 per cent). As well, public sector employees express more opposition (53 per cent) than those employed in the private sector (44 per cent). A majority of older Canadians (59 per cent) and half of men (52 per cent) believe hybrid work for federal civil servants should end. Women and Canadians under 35 are less in favour of ending remote work for the federal public service.”
Norman argues the COVID-19 pandemic rapidly accelerated a trend that was already in progress and, moreover, proved that organizations can function effectively with a combination of on- and off-site staff. The sudden shift to home-based work perhaps also minimized employee pushback that might otherwise have slowed the rollout of space rationalization strategies. Many office workers are now returning to a fait accompli.
“Remote work is part of the issue of slow absorption in the office market, but another big part of it has been the efficiency revolution of space,” Norman submitted. “That’s ongoing and something that’s going to continue to be felt.”
Yet, some employers may now be discovering they’ve squeezed their footprints too tightly. That’s a scenario senior real estate executives recently contemplated during a larger discussion about the state of downtowns during the Building Owners and Managers Association (BOMA) of Canada’s annual national conference, BOMEX.
“Some of those that gave up some of their office space are now finding out they don’t have enough space for their people. They’re getting congested and the quality of the experience is not as good,” said Ben Young, president and chief executive officer of Southwest Properties Ltd.
Mix of influences
BOMA Canada’s 2024 yearbook flags downtown vibrancy and the impact of remote and hybrid work among four issues that are keeping the commercial real estate industry awake at night. (ESG requirements and technological disruption are the other two.) There is something of a circular cause-and-effect to both concerns since downtown dynamics typically influence workers’ attitudes about the office, while workers’ presence, or absence, affects the liveliness of downtown districts and the prosperity of other types of businesses located there.
“The back-to-office movement has lagged in Ottawa and the retail there is really struggling. So how do they keep those retailers alive to get the downtown revitalized?” Young mused.
Setting the context for the panel discussion, BOMA Canada’s president and chief executive officer, Benjamin Shinewald, suggested that this year’s BOMEX host city, Halifax, stands in contrast to many Canadian cities for its vibrant, clean and safe downtown. Concomitantly, Class AA downtown office buildings in Halifax and Vancouver are the only two categories of office property to achieve positive investor sentiment in Altus Group’s Q3 2025 survey of 400+ clients’ attitudes toward 30 different combinations of asset types and markets. (Nine other categories of office and five categories of office land are ranked in the bottom 15.)
“At BOMA Canada we’re spending a lot of time talking about how to build coalitions around downtown revitalization, working with other organizations as well,” Shinewald advised. “It matters to the vibrancy of our economy, partly because our assets are heavily downtown-based. If they start falling in value, that’s bad for the economy, and it becomes a vicious cycle because the property taxes will only rise to make up for the difference.”
Traffic congestion and downtowns that are devoid of attractions or perceived to be unsafe can make the office a tough sell to workers who have the option to avoid it. That’s particularly true for workers who aren’t engaged with their colleagues, whether due to the nature of their work, personal preference or organizational inadequacy.
“If you factor those things, the majority of population will default to convenience if they have a good work-from-home situation,” acknowledged Michael Bansil, senior vice president, business excellence and innovation, with GWL Realty Advisors.
Return-to-office mandates now present some potential to lure back the reluctant, along with the risk of reinforcing their disenchantment. While it is primarily employers’ role to foster workplace culture, their landlords provide operational basics that can enhance or undermine how workers function and feel about their environment.
“We can’t dictate whether tenants have in-office mandates. We can control our assets,” Bansil reiterated. “That’s making sure that our assets are high-quality; they’re well amenitized; we have strong customer service; we have strong technology that helps with the customer experience, etc.”
Looking at where government investment could help, Judy Wall, president of East Port Properties, calls for public transit improvements and logistical innovation, such as harnessing artificial intelligence (AI) to better manage downtown traffic flow. She urges local governments to explore options to adjust traffic light intervals or switch from one-way to two-way street directions in real-time as needed.
“One of the reasons people don’t want to go downtown is because it’s congested. It’s hard to get around; they lose too much time; maybe it’s all one-way streets or there aren’t any lefthand turns,” she said. “We need to figure out how to move people around more effectively. That’s quite separate from the issue of whether we have an oversupply or undersupply (of office), but it all works together to make a downtown.”
Management flexibility can also be part of the formula. Young cited his company’s allowance for staff to choose their start and departure times to skirt peak traffic periods, but noted that such policies can come with the risk that early-leavers or latecomers will feel judged and defensive for being out of sync with other colleagues’ hours.
“It’s a cultural thing. You have to create that sense of comfort that you trust your employees and that everybody’s going to work a full day,” he maintained.
BOMA Canada’s recent survey of young commercial real estate professionals uncovered similar issues, with some respondents lamenting that their supervisors unduly value physical presence in the office over substantive contribution. However, a majority of participants rated their employers’ flexibility around hybrid work as either “very good” or “excellent”.
Even so, some of the same savvy young professionals endorse in-office work for its career-building spinoffs. While addressing key issues for emerging leaders during another BOMEX forum, they characterized the office as a venue for structured and casual interaction that supports the development of both hard and soft skills.
“I think it’s important for the next generation to be back at the office. You need that daily touch-point with your team,” asserted Raisa Hussain, a senior property manager with Colliers Canada.
“I do think remote work is lovely, but return-to-office is essential for young people to learn from the people around us,” concurred Michelle Kinsella, director of integrated program delivery for RBC’s Canadian retail branches. “It’s really hard to do that remotely. You miss a lot of those quick conversations with colleagues that you learn so much from in the office.”
