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Toronto’s commercial real estate market is in a state of sustained growth for the first time since the pandemic, according to two new reports.
Data collected by commercial real estate services firm Avison Young shows more office space was leased than vacated last year. It’s the first time that’s happened since 2019.
That’s in line with what Ben Haythornthwaite, director of market analytics at CoStar Real Estate, has observed. CoStar is an international information database for commercial real estate with an office in Toronto.
“It is fair to say that the market is stabilizing,” he told CBC Toronto. “Since the sort of midpoint of last year, we have actually seen about $250 million of transactions.”
Avison Young’s report also shows there’s less office space sitting empty compared to the year before, with availability declining from 21.2 per cent to 19.2 per cent.
At the same time, a new study from CBRE, another commercial real estate services firm, predicts commercial real estate investment could hit $56 billion dollars this year — up from $47 billion last year.
The CBRE attributes this growth to the “acceleration of the return-to-office trend.” Last fall saw the province calling its public sector workers back to full-time office hours and most large banks calling employees back in four days a week.
Bank’s return-to-office driving market improvements
Daniel Holmes, president of brokerage and advisory services at Colliers Real Estates Services Canada, told CBC Toronto the increase in sales of office space in downtown Toronto is driven by the banks.
“Once the banks announced that they were coming back to work, there was a huge trickle effect,” he said. “We’re seeing the banks, customers, clients, real estate companies, a lot of organizations are coming back.”
Many companies are also vying for spaces in office towers referred to as “trophy” properties in effort to entice workers back, Holmes said.
“A lot of that has to do with amenities, with office space layouts, creating an environment that is open and inclusive, but also having areas where you have quiet spaces to work,” he said.
Marc Meehan, managing director of research at CBRE, describes these spaces as “commute worthy” for workers.
Members of AMAPCEO, the union representing professional workers employed by the province of Ontario, held rallies around the province Thursday against back-to-office legislation. CBC’s Lorenda Reddekopp has the details.
“The number one thing is proximity to higher order transit in Toronto. That means Union Station and thereabouts,” he told CBC Toronto.
Other priorities include access to nearby restaurants and cafés, especially in the city’s underground PATH system, as well as building amenities like gyms and cafeterias, Meehan said.
In spite of all of this growth, Haythornthwaite still has some concerns about the market.
“Things are getting really, really good at the top end,” he said. “But we still have a huge amount of space, 35 million square feet or so, available throughout the whole GTA.”
Spaces outside downtown core less likely to be leased
Haythornthwaite feels lower quality buildings that are further out from the downtown core are unlikely to be leased under current market conditions unless organizations, municipalities or business improvement areas are willing to make upgrades.
Holmes also has some concerns about how the market could be impacted by outside forces.
“Anything geopolitical would be a scare or anything that has to do with the large recession,” he said.
Meehan agreed geopolitical uncertainty has weighed heavily on the market throughout 2025 and is likely to continue into 2026, but he believes the market has largely come to terms with it.
“We’re expecting greater acceptance of that as an existing condition and the need to operate through that,” he said.