Toronto’s downtown office vacancy rate was approximately 1.1%% in Q4 2019. Moving through COVID and the aftermath years, the downtown vacancy rate in Q3 2025 stood at 12.6%, according to Colliers.
But change is on its way.
Back-to-work mandates are signaling a higher demand for office space. But not all office buildings are benefitting – Class AA and Class AAA buildings near amenities and public transportation are experiencing an increase in occupancy, while Class B assets situated away from transit nodes, restaurants and shopping are still facing double-digit vacancies.
However, the growing need for office space means that higher-end buildings will run out sooner rather than later. This provides owner-operators of older, lower-class buildings with a great opportunity to upgrade their holdings and attract occupiers.
Where We Are Now
While remote and hybrid work is still in existence, more companies want to see their employees in person more often. Banks are leading the way with this; in May 2025, the Royal Bank of Canada requested that employees return to their physical workplaces for four days a week starting in September. One month later, in June, Scotiabank and the Bank of Montreal announced their own back-to-office requirements.
“The big banks are the standard setters, and we expect more companies to follow suit,” commented Jonathan Olynick, Senior Managing Director with Colliers’ Brokerage group in Toronto.
And all three of those banks, as well as other financial institutions, are located – or are expanding – in buildings throughout the Financial District.
Unfortunately, the back-to-work rising tide isn’t lifting all boats. First Canadian Place, Scotiabank Plaza and Royal Bank Plaza, where the banks have their homes, are within walking distance of plentiful transportation options, restaurants and shopping.
Other buildings in other downtown districts? Not so much.
An additional problem is that as employers increase their in-office days, vehicle congestion on the downtown streets is anticipated to worsen from its current congestion to constant bottlenecks.
As a result, office assets located in the Financial District and nearby could fare better on leasing and occupancy than those in the Downtown East, Downtown West and Midtown districts.
“Many new, well-located trophy offices in Toronto’s core are now seeing vacancy around 4%, a notably lower rate compared to last year’s numbers,” Olynick said. “Meanwhile, there is tougher competition among landlords of alternative or older buildings to backfill departing tenants, as office occupiers find themselves with a myriad of options.”
Solutions to Improve Occupancy
Owner-operators of these alternative or older buildings also have options. No, they can’t pick up properties and move them closer to Union Station. But they can invest capital, time and effort in the following actions to make their assets more appealing.
Ensure Turnkey Advantages
Chris Fyvie, Vice President with Colliers’ Office Leasing group in Toronto, noted that occupiers are increasingly focused on operational efficiency when selecting office space. As a result, the expectation is that premises be delivered in turnkey condition – move-in ready and requiring minimal tenant improvements. What was once viewed as an added convenience is now a fundamental requirement.
“Occupiers aren’t just leasing space – they’re choosing proximity to transit, staff amenities and operational ease,” he said. “In today’s market, location, employee incentives and turnkey readiness aren’t perks – they’re prerequisites.”
Boost Bike Infrastructure
Some employees wanting to avoid street congestion take their bicycles on trains or buses, then pedal the final mile or two to their offices. Owner-operators of buildings that aren’t within three or four blocks of transportation nodes can encourage the last-mile bicycle commute by offering secure bike racks, storage and end-of-trip amenities (showers, clothes lockers and on-site repair shops).
Landlords and investors might also consider partnering with Bike Share Toronto to offer occupier discounts on renting two-wheelers.
Offer Shuttle Services
Building owners and operators can sign an agreement with local transportation companies to move employees from subway or GO stations to the office and back at no charge, especially during peak hours. Such a convenience can help with commutes and provide an additional amenity to woo occupiers.
Another consideration is discounts on ride-sharing services for occupiers that need to reach transit hubs at certain times.
Fill Space with Service Amenities
On-site yoga rooms and fitness studios can be attractive features in an office building. However, meeting occupiers’ needs also means providing convenient retail services to help employees. Such on-site businesses can include dry cleaning, auto detailing, concierge, food shopping and dining options.
“Buildings that either include, or are connected to, a functional, convenient array of shopping, dining and necessity retail tend to attract good tenants,” Olynick said. “Moreover, having attractive, accessible and comfortable green outdoor spaces that promote relaxation and wellness should be prioritized.”
Positioning Buildings for Success
Not all urban core buildings are alike. This is certainly the case in bifurcated downtown Toronto, where different office buildings are located within 16.6 square kilometres. Investing capital and creativity in older, less well-placed assets can position them for success, especially as higher-end office space becomes scarce and occupiers consider other options.
An earlier version of this article appeared on ConnectCRE Canada.
The post Change is Coming to Downtown Toronto’s Office Market: Colliers appeared first on Connect CRE.
