Canada Office Figures Q3 2025

Executive Summary

• The Canadian office market shows signs of recovery, with the majority of markets seeing vacancy rates below pandemic-era highs. Downtown Trophy/Class A assets continue to boast strong performance highlighting tenant demand for high-quality spaces.
• Toronto saw a firm rebound this quarter, largely driven by strong leasing in existing space. With 1.6 million sq. ft. of net absorption recorded in the GTA, it is evident that Canada's largest office market is driving the national trend.
• Falling for a ninth consecutive quarter, sublet space is down 27.8% from its peak in Q2 2023. Overall sublet vacancy fell in four cities this quarter, while in Calgary it continues to rise.
• Construction activity has lowered to 2.6 million sq. ft. The pipeline continues to thin thanks to deliveries and is on track to report just 2.2 million sq. ft. of new supply in 2025, the lowest annual total in Canada since 2019. It is likely conditions are nearing a point where some planned projects may become viable once again due to demand for premium product.
• Nearly 1.0 million sq. ft. of space was removed for office conversion projects in Q3, helping moderate vacancy in markets such as Calgary, Ottawa and Edmonton.

Standout quarter of activity in one market outshines the rest

National net absorption came in on positive territory for the first time since Q2 2024 despite only four markets posting positive market activity in Q3.

Toronto had an outsized impact on the overall reporting 1.6 million sq. ft. of net absorption. With no new supply this quarter, all activity took place in existing product and signals a firm rebound in the market, in particular downtown.

Montreal, Ottawa and Vancouver meanwhile noted slowing with each recording over 100,000 sq. ft. of negative net absorption. As has been the trend of late, larger blocks of space have become vacant overshadowing other activity.

Given the recent levels of activity and along with the expected delivery of pre-leased new supply next quarter, it is likely that 2025 will see the realization of back-to-back years of positive net absorption. Among other activity, expect some stabilization in markets where occupiers continue to rationalize their portfolios around the latest return-to-office push.

Tenant spotlight on downtown Class A/Trophy assets

Flight-to-quality reached a new fever pitch in Q3 as downtown Class A vacancy declined by 90 basis points (bps) nationally, the largest quarterly decrease amongst this segment on record since 2008.

This was led by Toronto with a 250 bps tightening, along with four other markets which noted improving downtown Class A fundamentals (Winnipeg and Halifax, both -100 bps; Ottawa, -60 bps; and Edmonton, -10 bps).

Trophy assets, the top-tier within Class A, have reported declining vacancy for three consecutive quarters further exhibiting strength of these properties.

Lower quality Class B/C assets meanwhile continue to experience rising vacancy. The widening gap to Class A underscores tenant preferences for high-quality space.

Markets begin cresting the vacancy peak

Both the downtown and suburban vacancy rates noted a marked improvement nationally this quarter declining by 50 bps and 20 bps, respectively. This is the largest quarterly tightening downtown, nationally, since Q3 2011.

Five cities reported decreasing downtown vacancy in Q3 2025. Calgary and Ottawa saw improvement thanks to office-to-residential conversions. Leasing activity in downtown Toronto meanwhile resulted in a 150 bps drop in vacancy with numerous transactions being recorded over 50,000 sq. ft.

In suburban areas, six cities reported declines and was led by Halifax (-150 bps), Edmonton (-110 bps) and Calgary (-80 bps). Suburban Calgary again benefited from the removal of office inventory for conversion.

It is becoming clear that the office market is moving toward a recovery across Canada. As evidenced by recent trends, and despite quarterly movements, all but two markets (Vancouver and Waterloo Region) are now reporting total vacancy below their respective pandemic-era (post-2020) highs.

Sublet space continues to improve

Sublet space has declined for a ninth consecutive quarter, shedding an additional 279,000 sq. ft. in Q3 2025. Movement within this space has been due to a combination of transaction activity or space being reclaimed by the sublessor and increasingly, lease expirations coming due.

While an overall decline of 27.8% has been noted from its peak in Q2 2023, sublease options are still prevalent. The 10-year average for sublet space pre-2020 was equal to 8.2 million sq. ft.

On a per market basis, four Canadian cities saw sublet vacancies fall on a quarter-over-quarter basis, namely: Halifax (-57.7%), Edmonton (-16.8%), Montreal (-11.2%), and Toronto (-4.7%).

M&A activity in Calgary’s energy sector continues to drive the rise in sublet space in this city and, on a year-over-year basis, is the only market to report a notable uptick.

Construction pipeline holding at 20-year low

Nationally, competitive office space under construction has fallen to 2.6 million sq. ft. This represents just 0.5% of total inventory, decreasing marginally in Q3 2025 due to completions in Vancouver. With no new projects breaking ground, the office construction pipeline remains at a 20-year low.

Toronto continues to account for the majority of active development, with 79.0% of all space under construction. Outside of Toronto and Vancouver, all remaining markets have either one or no active office projects underway.

Over 60% of all office construction has been pre-leased, however, there exists much variation among regional commitment levels. Markets such as Toronto, Vancouver and Waterloo Region boast pre-leasing rates exceeding 50%, meanwhile neither Ottawa, Halifax or Calgary have recorded any pre-leasing.

New supply remains constrained despite demand for best-in-class

No new office construction starts occurred yet again this quarter, marking no project commencements since Q2 2024. Given the recent rebound and levels of demand for premium product, some shelved projects could become viable once again.

Vancouver was the only market to record new supply in Q3 2025, with three suburban projects delivering 166,000 sq. ft. in total. 55.3% of this new space was pre-leased.

Although office deliveries have been quiet throughout 2025, nearly 1.7 million sq. ft. of new supply is expected in Q4. If realized, this significant addition of product would bump annual new supply to 2.2 million sq. ft. for 2025, resulting in the lowest annual total in Canada since 2019.

The majority of new supply anticipated for Q4 2025 is attributed to CIBC Square Phase II in downtown Toronto. This marquee project totals 1.4 million sq. ft. and is nearly fully pre-leased.

Office conversions surge with record number of projects

Q3 2025 saw a significant uptick in conversion activity with 10 projects amounting to over 991,000 sq. ft. of space removed from inventory.

Office-to-residential projects continue to increase their share of total conversions, now representing 72.9% of all converted space. The only non-residential office conversion recorded this quarter is marked to become a charter school in the Calgary suburbs.

The cumulative total of former office space removed from inventory since 2021 for conversion has now reached 6.8 million sq. ft. An additional 2.6 million sq. ft. has been demolished over this same period. Together, they have helped reduce inventory by 2.0%.

Calgary continues to account for the largest share of projects, recording five building conversion new starts totaling over 500,000 sq. ft. in Q3 2025.

Multiple partial building conversions were also recorded in Edmonton this quarter, with select floors in these buildings being kept as traditional office space.