Canada’s office market has 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 found that the national office vacancy rate fell to 17.1% in the second quarter of 2026, compared with 18.7% a year earlier, reflecting steadily 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 driven by stronger leasing activity in several major cities. Of Canada’s 11 largest office markets, seven recorded positive net absorption during the second quarter, meaning more office space was occupied than vacated.
Overall, net absorption reached 1.2 million square feet, with Toronto, Calgary and Montreal each accounting for more than 300,000 square feet of newly occupied office space.
The improvement comes as more employers continue to encourage—or require—employees to return to the workplace.
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 the number of days many public-sector employees are expected to work from the office.
According to CBRE, these policies are contributing to healthier downtown office markets.
Nearly every major Canadian city saw office availability tighten during the second quarter, while vacancy rates declined across all categories of office buildings.
Meehan noted that the recovery first took hold in premium “trophy” office buildings before gradually spreading to other high-quality properties.
He said Class A offices have benefited the most so far, but Class B and Class C buildings are also beginning to see lower vacancy levels thanks to increased leasing activity and the conversion of some older office buildings into other types of developments.
Demand for premium office space remains particularly strong.
CBRE found that vacancy in trophy office buildings now stands at 9.4%, just one percentage point higher than before the pandemic.
Toronto continues to have the tightest market for top-tier office space, with vacancy in AAA buildings sitting at just 2.6%.
While occupancy is improving, developers remain cautious about launching new office projects.
Only one new office development broke ground during the second quarter, and CBRE says the pipeline of future office construction has fallen to its lowest level on record.
With few significant office projects expected to be completed after 2027, the limited supply of new buildings could help support the market if demand continues to recover in the years ahead.
