Canada’s office market is showing its clearest signs of recovery in years, even as the picture diverges sharply depending on the city, and even the building, in question.
CBRE’s Q3 2026 Canada Office Figures report found the national office market posted its fifth consecutive quarter of positive net absorption, with nine of 11 major markets reporting gains. Marc Meehan, CBRE’s managing director of research, said that level of consistency is unusual. “On average, you might see five or six of 11 be positive, but now we’re seeing it’s nearly unanimous,” he told RENX. Canada recorded two million square feet of net absorption in the quarter, with Toronto, Calgary and Montreal each logging more than 500,000 square feet, and Winnipeg also seeing strong leasing activity.
Downtown Cores Improving, But Rates Still Vary Widely
Nationally, the downtown office vacancy rate stood at 17.3 per cent in the third quarter, compared with 15.8 per cent in the suburbs, with both segments declining by 50 basis points — the suburbs’ largest quarterly drop since the first quarter of 2020. Eight markets saw declining downtown vacancy, led by Toronto (down 90 basis points), Calgary and Ottawa (both down 80) and Halifax (down 70). Calgary “surpassed our expectations,” Meehan said, while Vancouver underperformed, partly due to two large downtown office blocks being vacated amid consolidation in the technology sector.
In Ottawa specifically, CBRE’s figures showed the overall office vacancy rate fell to 14.9 per cent in the July-to-September period, with downtown vacancy dropping to 15.3 per cent and 65,471 square feet of positive absorption downtown. CBRE attributed the improvement partly to the federal government’s return-to-office mandate, which now requires public servants to be in the office at least four days a week. Public Services and Procurement Canada issued an expression of interest in July to identify potential office space across Ottawa after some departments reported insufficient room to accommodate current staffing levels under the mandate, though CBRE noted no commitments have been finalized.
Office Vacancy Rates Across Canadian Markets
Not every market is seeing the same momentum. In London, Ont., the city’s downtown revitalization plan — endorsed by council this summer — identified London as having the highest office vacancy rate in Canada, at 31.5 per cent, alongside a 17 per cent retail vacancy rate, or roughly 130 empty storefronts. Old East Village, a nearby commercial district, has a separate storefront vacancy rate of about 30 per cent, according to Kevin Morrison, president of that neighbourhood’s business improvement area, who said the district has “a lot of vacancies and a lot of absentee landlords.”
Quality Divide Shapes Leasing Decisions
Across the country, the gap in vacancy between top-tier and older office buildings has widened to what CBRE calls historically high levels. Trophy office vacancy is at a six-year low nationally, with Toronto and Montreal both reporting rates of three per cent or below. Meehan said tenants increasingly favour premium space over class-B and class-C buildings when remote work remains a competing option. “When we’re competing with remote work, it’s really difficult to make the case for occupying -B and -C when there are trophy options available to that tenant,” he said.
In the Greater Toronto Area, analysis from RENX found that owners of class-A and class-B buildings are beginning to benefit from stronger leasing activity, but only those that invested in upgrades during weaker market conditions. Buildings such as 320 Bay Street, 1 Adelaide St. E. and 145 King West have seen renovations to lobbies and amenities that are now helping them capture demand tied to return-to-office trends across financial, technology, and government-sector tenants. Research cited from Real Estate Management Services found that building accessibility — covering parking, driving ease and transit proximity — is now the second most important factor in leasing demand after cost, with each one-point increase in an accessibility score adding roughly five per cent more leasing demand.
Limited New Supply Keeps Pressure on Existing Buildings
Meehan noted that no office project completions were recorded nationally in the third quarter, and full-year new supply is forecast at just 2.3 million square feet, well below the five-year average, with no major deliveries expected beyond 2027. Since 2021, conversions have removed a cumulative 9.6 million square feet of office space from Canada’s national inventory, including seven conversion or demolition projects in the third quarter alone across Toronto, London and Ottawa. Meehan said conversions typically cost about 90 per cent of new construction, making the economics difficult, though Calgary’s municipal incentives have continued to support them there.
National sublease space also fell sharply, down 1.3 million square feet in the quarter — the largest decline since 2005 — and down a cumulative 50.2 per cent, or 8.7 million square feet, from its peak more than three years ago. Meehan said tenants with quality space are increasingly holding onto it rather than listing it for sublease, anticipating tighter conditions ahead. “Come 2030 and 2031, we’re forecasting vacancy in some markets to be in the mid- to low single digits,” he said.
Some communities are also looking beyond office towers to address vacancy in retail corridors. In London, city officials have been examining a British model known as the Vacant Shops Academy, which has worked with nearly 50 communities, mostly in England, to actively recruit specific types of tenants for empty storefronts rather than leaving vacancies to landlords and brokers alone, according to the initiative’s founder, Iain Nicholson.
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