‘Individuals who stayed home were not fully developed and individuals that stayed home started to miss out on things like promotions’
HR professionals should immediately reassess return-to-office and real estate budgets: downtown Toronto's office vacancy rate has been cut in half within a year, driven largely by bank return-to-office mandates – leaving employers with far less leverage on lease costs and desk capacity, according to a report.
The Globe and Mail cited CoStar Group data showing the availability rate across 47 large downtown towers peaked at 14.2% in early 2025, up from 13.7% a year earlier. By last month, that rate had been cut in half, while vacancy fell to 5.6% from 11.9%.
Across the wider financial district, availability dropped to 10.1% from a 2024 peak of 17.9%, the Globe reported. Falling vacancy hands landlords pricing power, meaning employers renewing or expanding leases should expect steeper costs.
Ben Haythornthwaite, CoStar's director of market analytics, told the paper landlords no longer need free-rent incentives to fill space. "There was an element of smoke and mirrors to the inducements, but it paid off," he said.
The recovery is uneven nationally: Calgary has returned to pre-pandemic vacancy levels, while Vancouver and Montreal are still adjusting to tenants needing less space than before 2019, the Globe reported. Across the broader Greater Toronto Area, vacancy sits near 8%, still double 2019 levels.
Bank mandates are behind the shift
Much of the turnaround traces to Royal Bank of Canada's May 2025 announcement requiring four-day office attendance that fall, a "watershed moment" for the core, Avison Young principal Stan Krawitz told the Globe. All big banks had adopted four-day mandates by fall 2025.
Krawitz said "rents have gone up significantly in the past 12 months" in some buildings. CIBC absorbed most of Shopify Inc.'s abandoned sublease at The Well, while Scotiabank added roughly 410,000 square feet across three leases.
Avison Young chief executive Mark Rose said power has flipped toward employers amid softer job vacancies and AI-layoff anxiety: "Individuals that stayed home were not seen, individuals who stayed home were not fully developed and individuals that stayed home started to miss out on things like promotions." HR departments should treat this as a signal that in-office visibility is again shaping promotion decisions.
A large-scale 2026 study commissioned by Source Office Furniture, built on more than seven million employee responses gathered through the AskPolly sentiment-analysis platform, found that more than 83% of Canadian workers expressed some level of support for return-to-office policies, but that support fell sharply when a five-day-a-week requirement was on the table, with 69% disagreeing with a full-time return. The same study found only 24.4% of respondents reported being in the office five days a week, down from roughly 83% before the pandemic — a sign most Canadian employees have settled into some form of hybrid arrangement even as employers push harder.
Toronto workers: it's the commute, not the office itself
The Source Office Furniture/AskPolly research broke sentiment down by city. In Toronto and Vancouver — two of Canada's most expensive and congested metro areas — commute time and cost were found to be doing much of the work in shaping employee resistance, with workers in both cities more likely to question whether the trip downtown is worth it, a pattern the study links to transit reliability and housing-affordability pressures pushing employees further from the core. That's distinct from cities like Calgary, Halifax and Winnipeg, where resistance was described as tied more to traditional office-culture expectations than to commuting burden.
Nationally, the same study found near-universal demand for better in-office conditions: 97.5% of respondents said improved workspace design would make them more comfortable with return-to-office policy, and commuting emerged as the single most-cited barrier to returning, ahead of both work-life balance and office infrastructure. Source Office Furniture president Matt Stewart summed up the takeaway: employees "want a reason to come in."
