Canada’s office market has now completed its first full year of recovery since the disruption caused by the COVID-19 pandemic, according to a new report from commercial real estate firm CBRE.
The report shows that the national office vacancy rate fell to 17.1% in the second quarter of 2026, down from 18.7% during the same period last year. While vacancy levels remain above pre-pandemic norms, the steady decline points to improving demand across the country.
“One year of solid office demand and declining vacancy is worth noting since many still question the office market,” said Marc Meehan, Managing Director of Research at CBRE Canada.
The recovery has been supported by stronger leasing activity, with seven of Canada’s 11 major office markets posting positive net absorption during the quarter. Overall, companies occupied an additional 1.2 million square feet of office space.
Toronto, Calgary and Montreal led the gains, each recording more than 300,000 square feet of positive net absorption between April and June.
The improving market comes as more employers continue to require staff to spend additional time in the office. Over the past year, several of Canada’s largest companies, including major banks, have introduced four-day in-office work policies. Municipal, provincial and federal governments have also increased office attendance requirements for many public-sector employees.
According to CBRE, downtown office markets are benefiting from this shift. Nearly every major Canadian city recorded lower vacancy rates during the second quarter, with improvements seen across all office categories.
Meehan noted that demand initially returned to premium “trophy” office buildings before gradually spreading to other high-quality properties.
He added that Class A buildings have been the biggest beneficiaries so far, while Class B and Class C offices are also beginning to recover as leasing activity picks up and some older buildings are removed from the market for residential or mixed-use conversions.
Demand for top-tier office space remains particularly strong.
CBRE found that vacancy in Canada’s trophy office buildings now stands at 9.4%, only one percentage point higher than before the pandemic.
Among the country’s largest markets, Toronto continues to have the tightest supply of premium office space, with vacancy for AAA buildings sitting at just 2.6%.
While demand is improving, new construction remains limited.
Only one new office development broke ground during the second quarter, and CBRE says the pipeline of future office projects has fallen to historically low levels.
With few major developments expected beyond 2027, the limited supply of new office space could further support occupancy levels if demand continues to strengthen in the coming years.
