CBRE Group, Inc. has shared figures for the fourth quarter of 2025, demonstrating the Canadian office market’s positive annual net absorption, an indicator of office leasing activity, for the second consecutive year.
“It is encouraging to see a second year of strong office leasing activity even though the office market recovery remains somewhat uneven,” said Marc Meehan, CBRE Canada research managing director, in a press release.
According to CBRE’s figures, by the end of 2025, Canada experienced 2.2 million sq. ft. of net office space absorption, with Toronto mostly benefiting from the increased office demand, seeing 2.7 million sq. ft of absorption, driven by downtown transactions over 50,000 sq. ft.
“We have worked through the bulk of the office decisions that had been delayed by the pandemic and increasingly office leasing activity is reflective of economic growth and talent availability, with Toronto benefiting most from the corporate commitments to office space at this stage of the recovery,” Meehan said.
CBRE noted that six cities assessed showed more stabilization and less sustained momentum. Last year, Vancouver, Edmonton, Winnipeg, London, and Waterloo saw less than 100,000 sq. ft. of absorption, whether positive or negative.
According to CBRE, in 2025, Calgary and Ottawa experienced the most market softening despite negative net absorption, with Calgary reporting a better vacancy rate compared with 2024 due to continued office-to-residential conversions.
Office figures across markets
CBRE highlighted a decrease in vacancies across seven of 10 market segments in the final quarter of 2025. Specifically, CBRE noted that:
- Vacancy in national downtown Class A office buildings was at 15.4 percent, its lowest level in three years, with Toronto leading with a decrease of 160 basis points (bps), followed by Montreal with a decline of 90 bps
- Vacancy among trophy assets, representing top-tier office buildings with prime locations and amenities, went down over four consecutive quarters
- Sublet space, considered a marker of companies’ shifting business plans or financial difficulties, declined by 1 million sq. ft. in the fourth quarter, the 10th consecutive quarter of decreasing sublease space
CBRE noted that 3.2 million sq. ft. of sublet space came off the market last year, more than in any year since 2005, with only 11.4 million sq. ft. of space left on the market, comparable to 2017, when the office market was deemed strong.
CBRE identified reduced office construction as a significant stabilizing factor, with only 2.8 million sq. ft. of office space constructed, 69.4 percent of which was pre-leased. CBRE stressed that Toronto’s CIBC Square II, which was fully pre-leased, was the only major project in development.
According to CBRE, in the fourth quarter, eight new conversion projects removed more than 1 million sq. ft. of office product from inventory, as landlords kept strategically repositioning dated assets. Among major Canadian markets, Calgary led in total space converted, comprising nearly half of all office product removed from inventory since 2021.
Industrial market
According to CBRE’s figures, in the final quarter of 2025, national net absorption of industrial space increased to 5.9 million sq. ft., mainly spurred by 5.3 million sq. ft. of pre-leasing on new supply delivered in the final quarter.
CBRE shared that Toronto and Calgary saw significant positive net leasing and pre-leasing activity in the fourth quarter, with Toronto leading net absorption with 4.3 million sq. ft. and Calgary following with 1.9 million sq. ft.
“There is a healthy amount of industrial leasing and areas of strength,” Meehan said in CBRE’s press release, “but fundamentals show some softness because we continue to build sought-after modern facilities despite softer demand overall.”
CBRE shared that availability rates went up in most markets from one quarter to the next. CBRE noted that:
- London led with 190 bps points added
- Vancouver followed with 70 bps added
- Calgary reported a decrease of 80 bps
- Toronto saw a decline of 10 bps
According to CBRE, last year, national available space increased by 14 million sq. ft. Montreal led with 5 million sq. ft. in available space added, while Toronto followed with 3.5 million sq. ft.
Per CBRE, in the fourth quarter, construction starts slightly increased, with 5.1 million sq. ft. of new developments, mostly consisting of design-build, big box properties in Calgary and Toronto, which accounted for a total of 59.1 percent of the starts.
CBRE added that, in 2025’s final quarter:
- The amount of industrial space built was 22 million sq. ft.
- The overall pre-leasing rate on the national construction pipeline went up to 55.4 percent, the highest level since 2022’s second quarter
- New supply increased to 9 million sq. ft., given the completion of numerous delayed projects carried over from the previous quarter