Canadian Office Market Accelerates in the Third Quarter As Pendulum Swings Towards a Landlord’s Market

Net leasing activity remained positive for a fifth consecutive quarter in Q3 2026, with 9 of 11 markets reporting positive absorption of available office space, led by Toronto, Calgary and Montreal.

National office market momentum remained positive for a fifth consecutive quarter in the third quarter of 2026, with 2.0 million sq. ft. of net absorption of office space across Canada. Nine of 11 markets logged positive net absorption, with over 500,000 sq. ft. recorded in each of Toronto, Calgary and Montreal, according to CBRE’s Q3 2026 Canada Office Figures.

Calgary’s office leasing momentum has continued to build over the last three quarters. In Montreal the last remaining large block of AAA space was leased alongside other healthy activity in the suburbs. Strong office leasing was also noted in Winnipeg. Vancouver’s weaker Q3 performance was an outlier, with the increase in vacancy largely due to consolidation by a single tech tenant.

“It’s time to turn the page on the office recovery. That recovery is well entrenched and with fundamentals on solid footing we’re seeing the advantage in lease negotiations move from tenants to landlords in more cities,” says CBRE Canada Research Managing Director Marc Meehan. “With trophy building space limited, leasing activity in Q3 was particularly strong in Class A buildings. We’re seeing further trickle over effect as leasing velocity is increasing in the areas neighbouring downtown cores, especially in Toronto.”

Businesses continue to focus their operations around office space, which is fueling leasing activity. Eight Canadian markets reported declining downtown vacancy in Q3, led by Toronto (-90 bps), Calgary (-80 bps), Ottawa (-80 bps) and Halifax (-70 bps).

National sublease space fell by 1.3 million sq. ft. in Q3, the single largest quarterly market decline since 2005. Sublet space has reduced by a cumulative 8.7 million sq. ft., or 50.2%, from its peak over three years ago, highlighting improved occupier sentiment. National sublet space inventory remains on par with 2018 levels and has now dropped below 9.0 million sq. ft. for the first time since Q2 2020.

No office project completions were noted in the third quarter. Full-year new supply is forecast to reach just 2.3 million sq. ft., well below the recent five-year average. New supply is expected to remain constrained with no significant deliveries on the horizon beyond 2027. Conversions and demolitions meanwhile continue to chip away at office inventory, with seven projects noted in the third quarter across Toronto, London and Ottawa.

“Elevated new supply deliveries weighed down the office market for many years, but office demand has come back so strongly that we’re now looking at a challenging future for businesses as many won’t be able to access quality office space in sought-after locations,” notes Meehan. “The earliest that Canada will see any significant new office completions is 2032, but that timeline shifts with each day that new construction isn’t kicked off.”

Industrial Demand Rebounds, Driving Availability Down

National net absorption of industrial real estate surged in the third quarter to total 10.3 million sq. ft. in net leasing, the highest quarterly total since 2022, according to CBRE’s Q3 2026 Canada Industrial Figures. Quarterly net absorption in Q3 lifted cumulative industrial leasing activity for the year to 18.8 million sq. ft., already well ahead of the full year totals of the prior three years.

Eight of the 11 tracked markets recorded quarter-over-quarter declines in availability. Q3 2026 marked a turning point where, for the first time in over three years, most Canadian industrial real estate markets saw lower availability rates on a year-over-year basis.

New industrial development projects in Q3 were led by Toronto (41.8% of total starts), Montreal (22.8%) and Vancouver (10.9%). Speculative projects made up the bulk of new construction starts, accounting for 88.4% of total starts in Q3, mostly in Toronto and Montreal. The industrial construction pipeline continues to favour large bay facilities, with mid-bay projects also seeing a notably larger share of active construction. New supply for the third quarter came in at 5.4 million sq. ft.

“With trade disputes ongoing, we keep waiting for the other shoe to drop in the industrial market,” says Meehan. “Aside from some challenges in Southwestern Ontario, however, the industrial market has performed well in 2026. But in this changeable environment, the past is not prologue.”