Toronto's downtown in major trouble as office vacancy soars to worrying new heights

Worrying new figures show downtown Toronto on a decline, revealing that a shocking 18 per cent of offices in the core of the city sat vacant during the first quarter of 2024.

CBRE's just-released Q1 Canada Office Figures highlight a resurgence in the national office market, though Toronto remains an exception from the pack as the city experiences a continued slump in office vacancy — all attributed to a continued post-pandemic recovery and exacerbated by new office buildings coming online and adding to vacancy totals.

Downtown Toronto saw a record office vacancy of 17.4 per cent in the fourth quarter of 2023, which increased slightly by 0.6 per cent during the first quarter of 2024.

Toronto's downtown core is in major trouble as office vacancy rate soars https://t.co/lnevP8mvx0 #Toronto

— blogTO (@blogTO) July 4, 2023

CBRE reports that the continued upward trend in office vacancy in downtown Toronto can be directly attributed to the introduction of new office completions, with one example being the just-opened TD Terrace office tower at Simcoe and Front.

The report also cites moves by office space tenants "gaining clarity in their decision making" and cutting down on office sublets for a second consecutive quarter.

Other local factors contributed to the glut of unused office space, like the fall of WeWork and office space formerly occupied by the co-working venture coming back on the market.

Toronto could face even higher vacancy rates in the future, with several commercial developments expected to be completed later this year. Of the total five million square feet of office space in the late stages of construction in the region, just 2.9 million square feet of this share has been secured by tenants.

Longer-term projections are not spectacular, including a 2023 report from Atlus Group that warned the city should expect an abundance of unoccupied office space lasting until the 2040s.

While things may look grim for stakeholders in Toronto for the foreseeable future, the city is an outlier in a national return-to-work trend that, in Q1 2024, saw its first quarter of positive net office leasing activity at the national level since the third quarter of 2022.