Downtown Toronto has gradually recovered much of the vitality lost during the pandemic years, but the city centre is still struggling with a dearth of office workers even amid signs of life returning.
New data in CBRE’s just-released Q1 2025 Canada Office Figures report reveals that vacancy in downtown Toronto’s gutted commercial market rebounded slightly during the first months of the year, but there’s still a long way to go before things are even close to normal again.
CBRE’s figures show that Toronto fared better than other Canadian cities during the first quarter of 2025, with downtown office vacancy declining by 50 basis points to 18.5 per cent.
While this leap marks the first substantial drop in vacancy recorded since the market took a nosedive in early 2020, there is still much ground to recover should vacancies ever drop to the figures seen in the before-times.
Central Toronto’s office market hit a record low vacancy rate of just 2.2 per cent in the fourth quarter of 2019. However, global events in the months that followed sent demand for office space into a tailspin that remains uncorrected five years since the pandemic first struck.
“The Canadian office market was poised for a rebound and while there are pockets of positivity, the office market, like much of the economy, is in wait and see mode,” says CBRE Canada Chairman Paul Morassutti.
“It’s unclear how much renewed momentum there is and to what degree tariff-based uncertainty is affecting decision-making. We should have a better idea in the second quarter of what the tariffs really amount to and how businesses will respond.”
While it’s easy to remain pessimistic about office drones ever returning to the core in full force, CBRE noted some key takeaways that may instill some confidence about the future.
Experts predicted that U.S. President Donald Trump’s tariff threats would impact business decisions and cut into demand or office space. However, this has not materialized, and CBRE states that “Based on first quarter data, however, there has yet to be an impact on the demand for office space.”
Aside from Q1 2025 marking the first substantial improvement in vacancy since before 2020, analysts noted that the second quarter will likely see a rebound in average asking rates and further declines in sublease space, currently at its lowest point since the second quarter of 2022.
The wave of office development activity that contributed to runaway vacancy rates in recent years is also slowing, with 2.2 million square feet in the pipeline across the city.
Outside of the downtown core, the overall Toronto vacancy rate sits at 19.7 per cent, while suburban vacancy rates range even higher at 21.1 per cent.
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