Office leasing activity 'reflective of economic growth and talent availability,' says report
The back-to-office movement is in full swing in Canada. That's according to a report showing that the Canadian office market’s annual net absorption totalled 2.2 million sq. ft. last year.
That follows a net annual absorption of 2.6 million sq. ft. in 2024, according to CBRE.
“It is encouraging to see a second year of strong office leasing activity even though the office market recovery remains somewhat uneven,” says CBRE Canada research managing director Marc Meehan.
The bulk of the office decisions delayed by the pandemic have been worked through, he says, "and increasingly office leasing activity is reflective of economic growth and talent availability," with Toronto benefiting the most.
Toronto was the clear outlier on the upside, with 2.7 million sq. ft. of net absorption, “primarily downtown, where recent deal activity has been propelled by transactions over 50,000 sq. ft.," says CBRE.
Top office markets in Canada
Meanwhile, six of the tracked markets ended 2025 in positive territory overall, with Vancouver, Edmonton, Winnipeg, London and Waterloo Region each posting less than 100,000 sq. ft. of absorption, either positive or negative, which CBRE says suggests stabilisation in most locations.
Calgary and Ottawa saw the greatest market softening, although Calgary’s vacancy rate still improved over 2024 “from continued office-to-residential conversions.”
Return-to-office momentum
Office vacancy is also dropping as more workers head back to the office.
CBRE says the office market hit a turning point in 2025 ending the year with two quarters of vacancy rate improvement. The national downtown vacancy fell by 50 basis points for the second consecutive quarter, while suburban vacancy tightened more gradually, down 30 basis points in Q4.
Declines downtown have been led by Toronto (-120 bps), where demand has been “spurred into action from rising return-to-office (RTO) expectations” and is now spreading across industry groups and becoming more broad-based, says the report.
Montreal recorded a 100‑basis‑point tightening downtown, and six cities posted decreases in suburban vacancy, including Montreal, London and Waterloo Region (all down 70 basis points).
Here are some employers that have called their workers to report to the office:
Office construction at multi-decade lows
Despite the growing demand, new office supply is at multi‑decade lows, according to CBRE: “The national office construction pipeline reached a floor in 2025, hovering around the 3.0 million sq. ft. mark before ending the year at 2.8 million sq. ft."
The pipeline is 69.4% pre‑leased nationally, with all but one market above 20% pre‑leasing. “CIBC Square II remains as the only significant project in development,” the report notes, with the fully pre‑leased Toronto tower due to complete in early 2026. Outside Toronto, “no meaningful product is being built downtown,” with limited, small‑scale suburban projects under way.
Construction starts and completions also fell to new lows. In the last six months of 2025, two projects started construction, totalling 83,000 sq. ft. in Halifax and Winnipeg, which CBRE says is “a new annual low for the country.” Over the full year, just 671,000 sq. ft. of new supply was delivered, “one of the lowest annual totals in over 25 years,” with just over half of that in Vancouver.
Despite the small volume, much of the new supply completed this year remains vacant and has one of the lowest levels of pre-leasing upon delivery in a given year. With limited starts, CBRE expects “the pipeline of new supply is expected to remain constrained” and says that with “no meaningful new supply deliveries on the horizon beyond 2026, demand is expected to trickle down to the next-best product tiers.”
