It’s backed by leasing data, transaction volume, and a clear behavioural shift from Canada’s largest employers.
After years of uncertainty, office space demand is stabilizing and improving, especially in Toronto’s downtown core.
Office Leasing Turns Positive for the First Time Since 2019
According to new market data from Avison Young, Toronto saw more office space leased than vacated last year — something that hasn’t happened since 2019.
That milestone signals a turning point. Office vacancies, while still elevated compared to pre-pandemic levels, are moving in the right direction:
Office availability declined from 21.2% to 19.2%
Leasing momentum picked up in the second half of the year
Transaction volume exceeded $250 million since mid-year
Market analysts describe this phase not as a boom — but as stabilization with momentum, which is exactly what institutional capital looks for before re-entering aggressively.
Investment Capital Is Following the Trend
The leasing recovery isn’t happening in isolation. A separate outlook from CBRE forecasts commercial real estate investment reaching approximately $56 billion, up from roughly $47 billion the year before.
The key driver?
👉 Return-to-office mandates.
Large employers — particularly Canada’s major banks and public-sector institutions — have pushed staff back into physical offices four to five days per week. That single shift is having a ripple effect across the entire downtown ecosystem.
Why Big Banks Are Quietly Driving the Recovery
Toronto’s downtown office recovery isn’t being led by startups or co-working spaces. It’s being powered by anchor tenants — especially the banks.
Once return-to-office policies were finalized, leasing activity followed:
Core financial institutions recommitted to downtown footprints
Professional services firms followed their clients
Supporting businesses returned to central locations
This has created a trickle-down leasing effect, restoring confidence in Class A office assets and prime locations near transit.
“Commute-Worthy” Offices Are Winning
Not all office buildings are benefiting equally.
Tenants are increasingly selective, prioritizing buildings that justify the commute. These “commute-worthy” offices tend to offer:
Immediate access to Union Station and major transit hubs
Connectivity to Toronto’s PATH system
On-site amenities like gyms, cafés, and collaborative spaces
Modern layouts with both open areas and quiet zones
Trophy office towers in the downtown core are leasing first — and often at stronger rents than expected.
Not All Office Space Will Recover Equally
Despite the positive momentum, challenges remain — especially outside the downtown core.
Roughly 35 million square feet of office space remains available across the GTA. Lower-quality buildings and suburban assets are struggling to attract tenants unless significant upgrades are made.
In today’s market:
Location matters more than ever
Building quality is non-negotiable
Capital improvement budgets are critical
Older assets without modernization plans may face prolonged vacancy or repositioning pressure.
What This Means for Commercial Property Owners and Borrowers
For owners, investors, and developers, this shift creates both opportunity and urgency.
Stabilizing values improve refinancing options
Stronger leasing supports underwriting assumptions
Equity-rich properties may unlock capital sooner than expected
At Lendworth, we’re seeing increased demand for private commercial mortgages tied to:
Office repositioning
Bridge financing during lease-up
Capital improvements and upgrades
Strategic refinancing while values recover
Traditional lenders are still cautious — but private capital is moving where fundamentals are improving.
The Bottom Line: Toronto’s Office Market Isn’t “Back” — But It’s Moving Forward
Toronto’s commercial real estate market has entered a new phase. It’s not a return to 2019 conditions — but it is a clear departure from pandemic-era decline.
The signals are consistent:
Leasing is positive
Investment capital is returning
Occupiers are committing long-term
Prime assets are outperforming
For owners who act early — especially those leveraging equity intelligently — 2026 could be a pivotal year.
Your property didn’t miss the recovery. The recovery is just getting started.