Article
Canadian Office Market Had Another Strong Year in 2025
January 7, 2026 4 Minute Read
The Canadian office market ended 2025 on a high note, with positive net absorption for the second year in a row. Annual net absorption, a measure of office leasing activity, totaled 2.2 million sq. ft. nationwide, according to CBRE’s Q4 2025 Canada Office Figures.
Toronto’s 2.7 million sq. ft of net absorption, driven by downtown transactions over 50,000 sq. ft., helped lift the national total into positive territory.
Six of the cities tracked showed more signs of stabilization than they did increased momentum. Vancouver, Edmonton, Winnipeg, London and Waterloo reported less than 100,000 sq. ft. of absorption last year, either positive or negative. Calgary and Ottawa reported the greatest market softening in 2025. Despite this negative net absorption, Calgary has seen its vacancy rate improve over 2024 from continued office-to-residential conversions.
“It is encouraging to see a second year of strong office leasing activity even though the office market recovery remains somewhat uneven,” says CBRE Canada Research Managing Director Marc Meehan.
“We have worked through the bulk of the office decisions that had been delayed by the pandemic and increasingly office leasing activity is reflective of economic growth and talent availability, with Toronto benefiting most from the corporate commitments to office space at this stage of the recovery.”
Class A Office Outperforms
Class A office buildings continue to outperform other segments of the market, with declining vacancy in seven of 10 markets in Q4. This was led by Toronto (-160 bps) and Montreal (-90 bps). National downtown Class A vacancy is currently at its lowest level in the three years at 15.4%.
Trophy assets, which represent the top tier office buildings with the best locations and amenities, have seen declining vacancy for four consecutive quarters.
The amount of space being sublet by companies, often a sign of a changing business plans or financial challenges, decreased by a remarkable 1.0 million sq. ft. in Q4, the 10th consecutive quarter of declining sublease space.
A total 3.2 million sq. ft. of sublets came off the market last year, more than in any year since 2005. Only 11.4 million sq. ft. of sublet space remains on the market, on par with 2017 levels, when the office market was considered strong.
One of the major stabilizing factors continues to be reduced office construction. Only 2.8 million sq. ft. of office space is being built, which is 69.4% pre-leased. CIBC Square II in Toronto remains as the only significant project in development and the project is fully pre-leased.
Q4 2025 saw eight new conversion projects remove over 1.0 million sq. ft. of office product from inventory as landlords continue to strategically reposition dated assets. Calgary leads the major Canadian markets in total space converted and accounts for almost half of all office product removed from inventory since 2021.
Industrial Absorption Jumps
Unlike the office market, the industrial market continues to search for a floor.
“There is a healthy amount of industrial leasing and areas of strength,” says Meehan, “but fundamentals show some softness because we continue to build sought-after modern facilities despite softer demand overall.”
National net absorption of industrial space jumped in Q4 2025 to 5.9 million sq. ft., largely driven by 5.3 million sq. ft. of pre-leasing on the new supply that delivered in the final quarter of 2025, according to CBRE’s Q4 2025 Canada Industrial Figures.
Quarterly net absorption was led by Toronto (4.3 million sq. ft.) followed distantly by Calgary (1.9 million sq. ft.). Both markets recorded strong positive net leasing in addition to pre-leasing activity.
Availability rates increased quarter over quarter in most markets, led by London (+190 bps) and Vancouver (+70 bps). This was offset by quarterly decreases in Calgary (-80 bps) and Toronto (-10 bps). In square footage terms, national available space grew by 14.0 million sq. ft. in 2025. This was led by Montreal and Toronto where available space increased by 5.0 million sq. ft. and 3.5 million sq. ft., respectively.
Industrial Construction Rises Slightly
Construction starts rose slightly in Q4 2025 with 5.1 million sq. ft. of new projects, consisting primarily of design build facilities. Most of the new developments in the fourth quarter were design-build, big box properties located in Calgary and Toronto; these accounted for a combined 59.1% of the starts in Q4. The amount of industrial space being built eased to 22.0 million sq. ft. in Q4.
The overall pre-leasing rate on the national construction pipeline improved to 55.4%, the highest level since Q2 2022. New supply jumped to 9.0 million sq. ft. in Q4 2025, as several delayed projects that had carried over from the prior quarter were completed.
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