Toronto Office Investment Forecast

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.