Toronto’s battered office space rental market is showing signs of recovery, as thousands of employees return to work in-person.
The downtown commercial office vacancy rate stands at 15.9 per cent as of the final quarter of 2025, down from 18.6 per cent at the beginning of the year, and 17.1 per cent in Q3, according to new data from CBRE Ltd.
Toronto also saw 2.7 million square feet of net absorption, a measure of the change in the amount of occupied office space, primarily downtown.
“What we’ve seen in the back half of 2025 is a resurgence of demand by occupiers or tenants for office space in downtown Toronto,” said CBRE Canada managing director of research Marc Meehan.
During the pandemic a lot of employers downsized, or let leases expire, and now that they are calling workers back, “there’s a mismatch,” he said.
Employers are “left playing catch-up.”
This trend, he added, is mostly in downtown Toronto, and not across the country.
It’s even more pronounced for premium buildings, close to transit, that are nice spaces to work in.
The vacancy rate for downtown Class A buildings in Toronto is 12.1 per cent, according to the CBRE data.
Meehan said the quality and location of office buildings was always important.
But it’s even more so post-pandemic when employers are trying to entice workers to come back.
“If you’re going to ask your employees to return to the office then you don’t want to be asking them to have really long commutes, or to bring them back into buildings that are really not reflective of their corporate identity,” he said.
“Or not somewhere where they’re going to be as effective and happy and engaged.”
Sublet levels are also dropping, an indicator of a healthy office rental market.
Meehan added these return-to-office mandates have been mainly in three sectors: government, tech and banking.
This fall, major Canadian banks including TD and RBC announced that employees need to return to the office for at least four days a week.
The subway might have felt a little more crowded Monday, as thousands of provincial civil servants headed back to work in person, under a mandate from Doug Ford’s government.
That rollout has not been without bumps, as Ford told reporters earlier this week that they’re still trying to make sure there’s enough space for everyone to sit.
Prime Minister Mark Carney has also said the federal government is discussing plans for a return to office.
Toronto Region Board of Trade president and CEO Giles Gherson said the “sweeping” return to work is “clearly driving a rebound” in commercial real estate.
He noted that some employers tried hoteling, where employees don’t have a dedicated workspace. But they found it wasn’t ideal, and are now looking for more room.
Amenities, from gyms to coffee bars and bike storage, are also in demand as they make the transition to in-office work a bit easier.
“There’s a real emphasis on, how can I make this as comfortable as possible to get people back,” he said.
Long commutes, though, make for lost productivity and unhappy workers.
“Congestion is one of the biggest issues facing the Toronto economy right now,” Gherson said.
The push to return to work has been largely opposed by unions, who argue workers deserve flexibility, and that they were still productive when at home during the worst parts of the pandemic.
The mandates have been particularly hard on parents of young children.
Allison Venditti, CEO of advocacy group Moms at Work, said there hasn’t been any clear reason shown for the need to return, other than that commercial landlords don’t want to lose money.
There haven’t been any before and after school child-care spots added or changes made to make commuting easier, she said.
In a “cost of living crisis” parents are now looking at shelling out for commutes, and more child care.
“Working parents did this during the pandemic because they had to, showed that they could do it, and now they’re ripping it away,” she said.
