Office market sees first full-year of recovery since pandemic disruption: CBRE

A stock photo of an office. (Unsplash/Israel Andrade)

TORONTO — A new report from CBRE says Canada’s office market has officially experienced one full year of recovery, a significant milestone after the COVID-19 pandemic disrupted the sector.

CBRE said Canada’s office vacancy rate stood at 17.1 per cent in the second quarter, down from 18.7 per cent a year earlier. 

“The office recovery began in earnest about 12 to 18 months ago and now there’s hard data to evidence that it’s solidly underway,” said Marc Meehan, CBRE Canada research managing director.

“(For) the first time since the pandemic started about six years ago, we’ve seen four consecutive quarters of positive net absorption in each quarter, nationally.” 

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Net absorption rates — the amount of space tenants moved into versus space they vacated — were positive in seven of 11 Canadian markets, the report says, with overall net absorption reaching 1.2 million square feet. Those gains were led by Toronto, Calgary and Montreal, which each had more than 300,000 square feet of office space absorbed in the second quarter. 

The trend comes as employers are increasingly mandating that workers head back to the office.   

Last summer, some of Canada’s largest companies, including several of the big banks, announced plans to shift to a four-day in office work week. Governments ranging from municipal to federal levels have also made moves to increase in-office days for workers. 

Going forward, Meehan said the sector’s recovery is expected to continue into 2030. 

“We think that nationally to return to where the office market was pre-pandemic, it will take until about 2030 based on demand coming back and vacancy rates still being elevated,” he said. 

The report said that fundamentals for downtown office space are improving, with nearly all Canadian cities seeing tightening inventory during the second quarter and all classes of office space recording declining vacancy rates across the country. 

Meehan said the first stage of the office recovery occurred in “trophy buildings” with demand trickling down to the next-best office spaces. 

“The balance of Class A was the primary beneficiary, however even Class B/C vacancy is starting to improve amid a mix of transactional activity and the removal of inventory for building conversions,” he said. 

The report said the vacancy rate for so-called trophy office buildings is only one per cent higher compared with before the COVID pandemic at 9.4 per cent. 

Toronto was found to have the least amount of available top-tier space, CBRE said, with a vacancy rate of 2.6 per cent for triple-A office space. 

Meanwhile, CBRE says new office construction starts remain low, with only one new project started in the second quarter.

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The report said that the “thinning pipeline” of new office supply has reached a historic low, and is expected to remain restricted, with no significant deliveries coming beyond 2027. 

As a result of the ongoing supply and demand dynamics, Meehan said rental growth is expected to continue accelerating over the coming five years.   

“Vacancy rates and as a consequence, rental growth, are really a product of supply and demand. We’ve got no new supply, and so the supply for the foreseeable future is effectively zero,” Meehan said. 

“Technically, there’s 1.2 million square feet under construction ... it’s quite insignificant, and so with supply being at an effective zero, all demand is going to further decrease vacancy rates and increase the amount of heat and competitiveness in the office market.” 

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Daniel Johnson, The Canadian Press

This report by The Canadian Press was first published July 6, 2026.