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Canada Office Figures Q2 2026

July 6, 2026

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Canada's office market posts four consecutive positive quarters, a six-year first

Executive Summary

In a six-year first, the national office market momentum remained positive for a fourth consecutive quarter in Q2 2026, totalling to 1.2 million sq. ft. Overall, seven of 11 markets reported positive net absorption and was led by Toronto, Calgary and Montreal.
Downtown fundamentals are improving with all but one market reporting tightening in Q2. All product tiers experienced declining vacancy, each improving by 20 bps or more.
National sublease space declined for a 12th consecutive quarter, falling below 10.0 million sq. ft. for the first time since Q2 2020. The steady pace of decline has continued with five markets reporting reductions in excess of 100,000 sq. ft. in Q2 2026.
Construction activity is at a two-decade historic low, with 1.2 million sq. ft. of predominantly suburban active construction. No significant deliveries are on the horizon beyond 2027, and leasing intentions remain focused on existing inventory.
Conversions/demolitions were quiet over the quarter with just two projects moving forward in Q2 2026. Since 2021, conversions and demolitions have helped reduce inventory by 2.6% and could outpace new supply in the year ahead.

Momentum holds for four consecutive quarters: a first in over six years

In a first since before the pandemic, national office market momentum was positive for a fourth consecutive quarter in Q2 2026 with 1.2 million sq. ft. of net absorption.

Seven of 11 markets saw positive net absorption this quarter, with over 300,000 sq. ft. being recorded in each Toronto, Calgary and Montreal.

While activity levels moderated in Toronto, Q2 absorption totals are nearly on par with Q1’s record-setting quarter if pre-leased new supply was excluded. There was a marked shift this quarter, however, with the majority of activity stemming from suburban GTA.

Performance elsewhere has continued to vary quarter-over-quarter, with markets like Montreal and Vancouver alternating between positive and negative quarters, a sign that these markets are still in earlier stages of recovery.

Ottawa meanwhile has continued to trail, noting a marked slowing over the last four quarters with several large-block vacancies coming back to market.

Tightening vacancy across all segments pointing to downtown recovery

Office vacancy declined downtown across all segments for a third consecutive quarter, with each tightening by 20 bps or more.

Downtown Class A properties in particular have seen a marked improvement to vacancy over the last year. Decreasing downtown Class A vacancy was reported in nine of 11 markets in Q2 2026 and across major markets was led by Edmonton (-120 bps).

Trophy assets, the top-tier within Class A, has seen continued tightening over the last six quarters with vacancy currently just 1.0% higher than the 8.4% reported downtown in Q1 2020. Increasingly few large-block vacancies remain within these in-demand assets and is tightest in downtown Toronto at a 2.6% vacancy rate.

An increasingly competitive environment for premium space should see demand soon spill over to the next-best spaces. On the lower end of the spectrum, Class B/C product noted a vacancy improvement, however the removal of underperforming assets from inventory played a larger role than transactional activity.

Widespread shift toward improved downtown fundamentals

Building on momentum from last year, national downtown vacancy declined by 40 bps in the second quarter. The suburban market meanwhile saw vacancy hold for a third quarter.

Continued downtown improvement has seen the delta between downtown and suburban vacancy narrow over the last four quarters to 150 bps, nearing in on a three-year low.

Initially led by Toronto, rising return-to-office expectations are resulting in a positive shift in leasing fundamentals with all markets save one reporting declining downtown vacancy in Q2 2026. London (-190 bps) and Montreal (-90 bps) noted the largest changes, followed by Edmonton and Waterloo Region (-50 bps, each).

Suburban market performance remains more mixed, with seven of 11 markets reporting increasing vacancy. This was once again led by London (+210 bps) and Vancouver (+190 bps).

Sublease space marks three years of continual declines

National sublease space has declined for an 12th consecutive quarter, down 836,000 sq. ft. in Q2 2026, for a cumulative total reduction of 7.4 million sq. ft. from its peak three years ago.

National sublet space remains on par with 2018 levels and has now dropped below 10.0 million sq. ft. for the first time since Q2 2020.

Unlike previous quarters where the decline could be mainly attributed to select markets, more widespread large improvements were noted this quarter. Five markets reported decreases of over 100,000 sq. ft. in Q2 2026, led by Montreal (-201,000 sq. ft.) and Waterloo Region (-190,000 sq. ft.).

On a year-over-year basis, all but four markets are reporting lower sublease space as a percent of inventory with Calgary maintaining its position as the market with the highest share of inventory.

New office construction starts remain few and far between

One new office project started construction in Vancouver this quarter in the form of a mixed-use development. This is only the third project to kick off across Canada in the last 12 months and is the first in this city since 2024. The average office component size for these developments is 40,100 sq. ft.

322,600 sq. ft. of new supply was delivered to the market in Q2 2026 across three projects in Vancouver and Victoria. This included TELUS Ocean in Victoria and the Commons Creative Space at Oakridge Shopping Centre in Vancouver. Both delivered with partial pre-leasing.

An additional 557,000 sq. ft. of office inventory is anticipated for delivery over the remainder of 2026 resulting in an annual total of 2.5 million sq. ft.

Due to limited starts, the thinning pipeline of new supply is expected to remain constrained with no significant deliveries on the horizon beyond 2027.

Office construction pipeline at two-decade historic low

Following the latest round of deliveries, the national office construction pipeline has thinned to 1.2 million sq. ft. This is a new historic low for Canada that has been unmatched since before 2000.

Despite the lean level of construction, the total national pipeline is presently only 24.3% pre-leased, with the market instead focused on existing product. Halifax has maintained its position as the market with the highest percentage of pre-leasing across the country at 37.5%.

The supply pipeline is primarily suburban, with only Toronto building downtown product as of Q2 2026. Very conservative levels of suburban development are underway with no more than four active projects in a single city.

Record low levels of construction will see conversions and demolitions remain roughly on par with new supply once again this year and remain roughly on par with one another year-to-date in 2026.

Conversion activity pulls back after record-setting start to 2026

Conversion and demolition activity slowed in Q2 2026 with just two projects moving forward this quarter. This comes off the heels of a record high amount of activity and is one the lowest quarter on record since this trend took hold.

A previously noted office conversion project in Ottawa is being marketed for lease once again, 1601 Telesat Court, underscoring the challenging nature of these projects. Its re-addition to inventory has moved Ottawa to third among tracked markets by share of office conversions.

Since 2021, conversions have removed a cumulative 9.1 million sq. ft. of office space from inventory nationally. An additional 3.0 million sq. ft. has been demolished over the same period. Together, they have reduced national inventory by 2.6%, removing properties otherwise facing potential obsolescence.

Calgary’s Downtown Office Conversion Program has reopened for a third phase of applications. A total of $25 million in funding is available through this phase, with higher incentives being offered for hotel developments.

Local Market Insights

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