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Market Report

Toronto Office Market Report

2025 Investment Forecast

Falling Interest Rates Set to Spark
Optimism Amid Ongoing Return to Office

Vacancy rate to stabilize as demand improves. Five years of subdued demand due to the hybrid work model has caused Toronto’s office vacancy rate to climb by over 800 basis points since the end of 2019. Combined with a wave of newly completed projects, this led to roughly 27 million square feet of unoccupied space on market by the end of 2024. This year, however, metro fundamentals are expected to take a turn for the better. According to Strategic Regional Research Alliance, in late 2024, Toronto’s office utilization reached its highest level since the onset of the pandemic. This positive trend is set to continue into 2025 as more employees return to the workplace. Moreover, declining interest rates will support business expansion – especially in the metro’s tech and financial sectors – stimulating office demand. Adding to these positive developments, Ontario’s government recently announced plans to purchase downtown office buildings for its own use. This will assist with reducing vacant space and bolstering investor confidence over the coming years. These demand tailwinds are set to rouse more optimism in Toronto’s office sector, with vacancy projected to stabilize by year-end for the first time since 2019 and rents expected to inch higher as a result.
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