Canadian Office Market Marks One Year of Sustained Recovery

Net office leasing remained positive for a fourth consecutive quarter in Q2 2026, with 7 of 11 markets reporting positive absorption of office space, led by Toronto, Calgary and Montreal.

The Canadian office market has officially experienced one full year of recovery. For the first time since before the pandemic, office leasing momentum remained positive for a fourth consecutive quarter in the second quarter of 2026. Seven of 11 Canadian markets reported positive net absorption of office space, led by Toronto, Calgary and Montreal, according to CBRE’s just-released Q2 2026 Canada Office Figures.

Downtown fundamentals are improving with all but one Canadian city seeing tightening in the second quarter and all classes of office space recording declining vacancy, nationally. Toronto, Calgary and Montreal each had over 300,000 sq. ft. of office space absorbed in the second quarter, with most of the activity stemming from the suburban GTA.

Decreasing downtown Class A vacancy was reported in nine of 11 cities in Q2, and Edmonton led the way (-120 bps). Trophy office buildings have had so much space leased that vacancy in this category is just 100 bps higher than before the onset of the pandemic, at 9.4%. Increasingly few large-block vacancies remain in these sought-after buildings, and downtown Toronto has the least available trophy space with an AAA vacancy rate of only 2.6% in Q2. Lack of premium space should see tenant demand soon spill over to the next-best spaces.  

“One year of solid office demand and declining vacancy is worth noting since many still question the office market,” says CBRE Canada Research Managing Director Marc Meehan. “The first stage of the Canadian office recovery was in trophy buildings and it’s encouraging to see demand trickling down into the next-best spaces. The balance of Class A was the primary beneficiary, however even Class B/C vacancy is starting to improve amid a mix of transactional activity and the removal of inventory for building conversions.”

New office construction starts remain few and far between. Just one new office project started construction in the second quarter, in Vancouver, only the third development to kick off across Canada in the last 12 months and the first in that city since 2024. The thinning pipeline of new office supply – currently a historically low 1.2 million sq. ft.– will remain constrained with no significant deliveries on the horizon beyond 2027.

Office conversion and demolition activity has pulled back after a record-setting start to 2026, with just two projects moving forward in Q2. Since 2021, conversions have removed 9.1 million sq. ft. of office space from inventory nationally. An additional 3.0 million sq. ft. was demolished in the same period. Together this reduced national inventory by 2.6%.

National Industrial Availability Down For First Time Since 2022

Nine of the 11 tracked industrial markets in CBRE’s Q2 2026 Canada Industrial Figures recorded flat or declining space availability. Amid positive net absorption and muted new supply of industrial real estate across Canada, the national availability rate decreased for the first time since the third quarter of 2022, easing 10 bps quarter-over-quarter to 5.5%.

National net absorption in Q2 totaled a modest 3.9 million sq. ft., marking the third consecutive quarter of positive leasing and bringing the year-to-date total to 7.8 million sq. ft. Leasing activity was broadly distributed in the quarter; eight of the 11 tracked markets recorded positive net absorption. Toronto led with 1.3 million sq. ft., followed by Montreal (786,000 sq. ft.) and Calgary (626,000 sq. ft.)

New industrial space deliveries in Q2 amounted to a muted 2.4 million sq. ft., the lowest quarterly amount since Q3 2017. Toronto accounted for the largest share of new supply in the quarter (45.4%), followed by Calgary (18.0%) and Montreal (15.7%). Construction starts slowed for a third consecutive quarter and totaled 4.2 million sq. ft. in Q2, with speculative projects accounting for 89.4% of these. With starts outpacing completions, the under-construction pipeline expanded 7.6% over the quarter to 25.3 million sq. ft.

“Canadian industrial markets are holding steady, and fundamentals are more or less balanced,” says Meehan. “Industrial momentum, in either a positive or negative direction, is likely to become apparent later in the year as the Canada-US-Mexico Agreement (CUSMA) negotiations take shape.”