Return-to-office to drive surge in leasing activity in Toronto

Between 2019 and 2024, office-using industries in the Toronto CMA grew by 25.0% or 226,000 employees. Historically, increases in employment have closely tracked office absorption: when more people were employed in office-using sectors, leasing demand strengthened, vacancy declined, and landlords gained pricing power. Since 2020, however, this relationship has broken down. Despite strong job growth, remote and hybrid work reduced space needs, leading to negative absorption and pushing vacancy up from 5.6% to 17.1%.
With both private- and public-sector employers requiring more in-office presence, many companies are reassessing layouts, hybrid schedules, and overall space requirements. This shift is beginning to drive stronger leasing momentum as employers balance flexibility with the need to accommodate staff in the office.
Today’s office market reflects some of the most tenant-favourable conditions in decades. In Downtown Toronto, for example, vacancy has climbed from 2.2% in early 2020 to 15.7% today, giving occupiers unprecedented leverage on rents and incentives. However, cycles change, and in the Trophy segment vacancy is already back in the low single digits, driving rents higher. Over time, demand is expected to trickle down into Class A and eventually Class B properties. As this happens, the market will gradually rebalance, reducing tenants’ negotiating power.

November 26, 2025

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