Market Report
Toronto Office Investment Forecast
2026 Investment Forecast
Dwindling Supply Pressures and Renewed
Demand Set Stage For Office Recovery
Office market is turning the corner. Vacancy climbed to 14 per cent last year after approaching all-time lows just prior to the pandemic, with downtown at only 2.0 per cent. This drastic rise reflected a historic development cycle that began in 2019 amid tight market conditions, just as hybrid work sharply reduced space needs. Now, with this wave of product largely delivered, the city’s once-robust build pipeline is tapering off, with virtually no large-scale projects expected outside of the fully pre-leased CIBC Square. At the same time, demand is improving. Major banks, telecommunications firms and local levels of government have expanded return-to-office mandates, helping lift occupancy and leasing activity in the core. Class AAA vacancy is extremely tight as tenants consolidate into higher-quality space, while limited new supply will likely prompt spillover demand into high-quality suburban assets as well as Class A and select Class B buildings downtown. With Toronto’s role as Canada’s financial and business hub anchoring long-term demand, vacancy is expected to stabilize and then modestly improve over the course of 2026 as supply constraints take hold and corporate space requirements gradually recover.
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