Toronto's dying office market could see major rebound in 2026

After years of stalled leasing and high vacancies, Toronto's once-thriving office market might finally be inching toward recovery and could even see a meaningful rebound by 2026, according to a new industry report. 

A new national outlook from real estate services firm Avison Young paints an upbeat picture for Canada's commercial real estate sector as we head into the new year. The firm surveyed nearly 200 of its professionals across the country, with an overwhelming 97 per cent saying that they expect market activity to remain steady or even improve in 2026. 

Across the country, the report notes that retail is also expected to see some resurgence, thanks to return-to-office mandates, which will inevitably boost downtown foot traffic and support ground-level businesses. 

"Following a difficult 2025, fundamentals are looking up across Toronto's commercial real estate market for 2026," the report reads, noting that out of the Avison Young professionals surveyed, 74 per cent think activity will be up in 2026. 

"The federal budget's focus on infrastructure spending and Canada-first policy has the potential to stimulate economic growth and create opportunities across both major and secondary markets – as do various return-to-office programs introduced by major employers, such as banks and government agencies, which are driving increased foot traffic, traction and improved vibrancy across the downtown core." 

Despite this, the office market's recovery will likely not be evenly distributed, with trophy office assets as well as A-class office buildings, which already maintain low vacancy rates, standing to benefit the most from renewed leasing activity. 

On the other hand, B- and C-class properties might still struggle with higher vacancies, although improvement is still expected for these types of assets as well, as more companies bring employees back to the office. 

"There's a continued flight to quality, and what's driving that is tenants' search for highly amenitized spaces and well-located buildings. Those who prioritize key amenities and inducements – including walkability and ready access to transit – as part of their workplace strategies will benefit in 2026," the report reads. 

"Toronto Downtown is moving into 2026 with optimistic energy. With strong fundamentals in place and a potential shift toward recovery and expansion anticipated in 2026, both landlords and tenants who plan proactively and are quick to act could see notable success across the market." 

The 2026 outlook mirrors the Commercial Real Estate Services (CBRE) Canada's Office Figures for Q3 2025, released in October, which found that nearly all markets across the country are reporting vacancy below post-2020 peaks, with Toronto leading the recovery.