Canada’s Recovering Office Market: What You Need to Know
2 min read
The Canadian office market is experiencing a steady recovery with limited new construction, positive leasing momentum, and employee in-office mandates driving this shift. Office vacancies have hit a low in many major markets, and the vacancy rate is expected to stay relatively flat in the coming months. With no large office developments projected, the limited new supply reduces vacancies. However, companies remain hesitant about the need for office space, the uncertainty of interest rates, and the potential impact of trade tariffs.
In 2024, leasing activity increased to approximately 15 million square feet, compared to 12.9 million square feet in 2023. Momentum is expected to continue in 2025 with return-to-office mandates resulting in Canadians spending more time physically in office, between two to four days a week. The shift in workplace preferences has increased demand for Class A space as companies want high-quality buildings that offer attractive amenities to encourage employees to return to the office. Class A buildings dominated leasing activity with 11.6 million square feet of leased space in 2024. Although Class B and C buildings have higher vacancies, they remain attractive for certain price categories or redevelopment projects. Target purchase prices now reflect the investment needed for different office conversion strategies. Overall, Canada is seeing increased investment activity for office redevelopment opportunities.
Vancouver has the lowest overall vacancy and Class A vacancy at 13.2% and 12.7%, respectively. The growing demand and limited availability of Class A space makes Vancouver an attractive market for new office development in the coming years. The strong tech and business sector and efficient public transit system contributes to the recovering office market in Vancouver. Calgary is an optimistic market for investors as it provides opportunities for growth and positive leasing momentum, despite a high vacancy rate. Affordable housing and demographic growth drive interprovincial migration and positively impact the economy. Similarly, Montreal is also benefitting from interprovincial migration due to greater affordability. Montreal has more space available and is experiencing a steady improvement in overall vacancy due to limited new construction in the market. In Toronto, approximately 550,000 square feet of new office space was completed in 2024, resulting in higher availability rates. However, leasing activity is increasing, and vacancies are expected to stabilize.
Many investors are looking at office space for potential opportunities as the Canadian office market recovers from the shift to hybrid work, overall business downsizing, and economic uncertainty from the past few years.
References
Wong, R., & Nhieu, J. (2025, January 28). Turning point – Canada’s office market nears bottom. Altus Group Insights. https://www.altusgroup.com/insights/canada-office-market-nears-bottom/
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