A new report from commercial real estate firm CBRE indicates a significant shift in Canada's office landscape, with the national vacancy rate showing its first meaningful decline since the onset of the pandemic-driven remote work era.
The Data Shows a Turning Point
According to the latest figures, Canada's overall office vacancy rate dipped to 18.2% in the fourth quarter of 2025. This marks a notable decrease from the previous quarter and suggests a reversal in the prolonged trend of emptying downtown cores. The improvement is attributed to a combination of factors, most prominently a sustained increase in the number of employees returning to physical workplaces.
While the national average remains elevated compared to pre-2020 levels, the downward movement is being interpreted by industry analysts as a crucial signal of recovery. The data reflects a gradual but steady increase in office occupancy across major Canadian cities, driven by corporate mandates and a growing preference for in-person collaboration.
Major Urban Centers Lead the Recovery
The report highlights that the trend is not uniform but is concentrated in the country's largest economic hubs. Toronto's financial district, a bellwether for the national market, is showing particular resilience. Other major markets like Vancouver, Calgary, and Montreal are also experiencing a reduction in available sublease space and a slight firming of rental rates for premium, modern office buildings.
This urban-led recovery underscores a key insight: employees are returning primarily to high-quality, well-located offices that offer amenities and a superior work environment. Older, Class-B buildings continue to face significant challenges, indicating a "flight to quality" that is reshaping demand within the sector.
Implications for the Commercial Real Estate Market
The gradual decline in vacancy rates carries broad implications for investors, developers, and municipal governments. For cities, a healthier office sector supports downtown businesses, transit systems, and property tax revenues. For the real estate industry, it provides a measure of stability after years of uncertainty and may influence future development and investment decisions.
However, experts caution that the market is undergoing a permanent transformation. The hybrid work model is now firmly entrenched, meaning overall space demand may not return to previous peaks. The success of office properties will increasingly depend on their ability to adapt to new employee expectations around flexibility, technology, and wellness.
The CBRE report, released in early January 2026, offers one of the first comprehensive data points suggesting the long-awaited office market correction may be underway. While the recovery is expected to be slow and uneven, the shift in momentum provides a cautiously optimistic outlook for a sector that has been at the epicenter of pandemic-induced economic change.
