SW Ontario Office Market Report

Stability to mitigate as headwinds grow. During the pandemic, Southwestern Ontario’s office market remained relatively stable. Net absorption was positive, which helped the vacancy rate contract 100 basis points between 2019 and 2022. This was consistent with the national trend as underlying fundamentals in suburban markets were more balanced compared to downtown cores. These suburban regions added less new supply, offered shorter commute times and were more suited for the evolving hybrid work trend. With Southwestern Ontario witnessing an influx of new supply in 2022, coupled with tenants continuing to right-size their office footprints as remote work gained momentum, vacancy is expected to increase significantly this year. As companies try to lure employees back to the office, the region is also seeing the flight-to-quality trend witnessed across the nation. This trend, coupled with right-sizing, is resulting in older space becoming available, which caused net absorption in the first quarter of 2023 to turn negative and eliminate all the gains over the previous years.