TORONTO – A recent report indicates that Canada has experienced a decline in office vacancy rates for the first time since the onset of the pandemic, primarily driven by an accelerating return-to-office trend. According to the data released by CBRE, the national office vacancy rate decreased to 18 percent by the end of 2025, a slight improvement from 18.7 percent recorded a year prior.

The drop in vacancy rates coincides with a notable reduction in the construction of new office buildings, which has reached the lowest levels seen in the past two decades. New construction starts have even hit a record low, highlighting a significant shift in the office real estate landscape. The report emphasizes that the adjustment in vacancy rates can be attributed to various factors, including strategic decisions by landlords to either convert or demolish certain properties. This proactive approach has resulted in a 2.2 percent reduction in inventory since 2021.

Last year, overall net absorption stood at 2.2 million square feet, with the city of Toronto playing a pivotal role in this growth, effectively counterbalancing negative net absorption rates observed in other markets such as Ottawa and Calgary. This trend suggests that while some regions continue to struggle with vacant office space, others are adapting and beginning to occupy available office real estate more effectively.

In response to the ongoing adjustment in work patterns, several major Canadian banks initiated policies aimed at increasing in-office attendance, starting in the fall of 2025. Additionally, the Ontario government implemented a regulation mandating employees to return to the office five days a week, beginning on January 8, 2026. These changes reflect a renewed commitment to in-person work, signaling a potential shift in workplace dynamics as organizations seek to adapt to post-pandemic realities.

This updated analysis offers a glimpse into the evolving landscape of Canada’s commercial real estate sector as stakeholders navigate the complexities of post-pandemic recovery. With landlords seeking innovative solutions and government mandates urging employees back to physical offices, the trajectory of office occupancy rates remains a crucial aspect to monitor in the coming months.