Canadian office market report

Hybrid work models that dominated the past two years are giving way to firmer policies promoting in-office presence. Canada’s “Big Six” banks led this shift with five-day return-to-office mandates and continue to seek additional space to accommodate their full workforces. Provincial governments of Ontario and Alberta have announced a return to five days in-office in 2026, while Québec recently adopted a three-day policy and other provinces are currently reviewing their approaches. This follows the Federal government’s move to require three days in-office starting in 2025.

At the same time, several countervailing forces are tempering this momentum. The 2025 Federal Budget confirmed plans to reduce the public service by 40,000 positions, with direct impacts on Ottawa’s office market. In Calgary, mergers, acquisitions, and tenant relocations in the energy sector have driven increased availability. Vancouver’s tech sector is expected to release additional space in mid-2026. Meanwhile, the Federal government’s 49% reduction in student visas may reduce office demand from education-related tenants nationwide.

Tenant improvement (TI) allowances have continued to increase as landlords seek to differentiate their spaces in a competitive market, particularly among non-Trophy buildings. Larger tenants requiring more than 20,000 square feet (sf) are drawn to TI packages, which help offset high construction costs required to earn employees’ commutes. As a result, there is strong demand for turnkey or near-turnkey office spaces to limit upfront costs, although these options are becoming increasingly scarce.

The quality of amenities remains another key driver of tenant demand impacting a building’s leasing potential. According to surveys conducted with Avison Young brokers, walkable amenities consistently rank as a top priority for tenants across all six major markets. Beyond this common factor, priorities vary by city: in Vancouver, Edmonton, and Calgary, fitness centres are most valued, while transit accessibility and walkable amenities are the highest priorities in Toronto, Ottawa, and Montréal.

According to Avison Young’s Outlook 2026 report, 72% of our experts believe that office market activity will be higher in 2026 than the second half of 2025. Driving this optimism on the leasing market is the uptick in tenant walkthroughs coinciding with an increase in leasing velocity. Concession packages are expected to stabilize or compress while taking rents further increase, particularly for top-quality, institutional-grade assets.

On the investment side, there is growing interest among private and institutional investors for quality, well-located office buildings, which remain in short supply. Cap rates, pricing, and loan defaults are expected to be stable, creating ripe conditions for confidence and deal activity. A great indicator of improving investor confidence is the $1.2‑billion acquisition of The Post by Pontegadea in Q4-2025 – a new Class A office building in Downtown Vancouver. Transactions for top-quality assets are happening at an accelerated pace, a trend expected to continue into 2026.