Which cities are seeing the biggest drop in vacancy rates across Canada?
Canada’s office and industrial property markets are tightening for the first time since the pandemic, a shift that could narrow employers’ options for hybrid workplaces and distribution hubs.
The national office vacancy rate fell 100 basis points year‑over‑year to 13.6 per cent, while industrial vacancy recorded its first national decline since 2022, according to Colliers Canada’s Q1 2026 National Market Snapshot.
Industrial net absorption reached 3.6 million square feet in the quarter, outpacing 3.0 million square feet of new supply and signalling renewed balance after several years of heightened vacancy and speculative development.
“The decline in vacancy we’re seeing isn’t a statistical blip; it’s the result of a structural rightsizing,” said Adam Jacobs, Head of Research at Colliers Canada. With office conversions removing obsolete stock and “a near‑total halt in new builds,” he says, “the window to secure top‑tier space is closing, and we expect this scarcity to drive significant competition through the remainder of 2026.”
Leasing activity strengthening downtown
Colliers says leasing activity is strengthening in Downtown Class A buildings nationwide as employers gravitate to better‑located and amenity‑rich assets. With less than 2.0 million square feet of office space under construction across the country, the firm expects limited new supply to support further tightening as organisations reshuffle within existing inventory.
The consultancy also notes that competition for premium premises is intensifying, shifting conditions from a pandemic‑era “flight to quality” to what it describes as a “fight for quality,” particularly evident in Montréal and Toronto. Major tenants are increasingly renewing early to secure top‑tier buildings, while incentives and turnkey fit‑outs are becoming less common in the best assets.
Ontario’s full-time return-to-office (RTO) mandate for 60,000 provincial public servants has collided with limited office capacity, thousands of accommodation requests and falling morale, unions claimed earlier this year.
In February, the federal government insisted it can secure enough desks for public servants as it moves to a four‑day‑a‑week office mandate, even as unions and experts warn that many buildings are already at or beyond capacity.
Vancouver, Calgary
Across Canada’s major markets, Colliers Canada’s Q1 2026 snapshot shows tightening conditions in both office and industrial real estate, with direct implications for workforce planning and location strategy.
In Vancouver, office vacancy has fallen to 9.5%, with Downtown absorbing 104,895 square feet and Midtown/suburban areas 70,935 square feet. Downtown availability edged down to 14.6%, and average office net rent now sits at $34.02 per square foot, with Class A towers commanding a premium.
Industrial fundamentals are even tighter: vacancy dropped to 3.2%, the sharpest quarterly decline since before COVID‑19, as more than 1.1 million square feet of space was absorbed—almost twice new supply. Large‑bay assets routinely draw multiple offers, meaning HR leaders in tech, logistics and goods movement must factor scarcer, more expensive space into hiring and commuting strategies.
Meanwhile, Calgary’s office market remains split, with high overall vacancy of 22.9% but much stronger performance in the suburbs. Suburban vacancy dropped to 15.3% on the back of 277,164 square feet of positive absorption, while the Beltline registered its first negative quarter since 2025.
Average office net rent in Calgary rose to $17.99 per square foot, reflecting firmer demand for better‑quality space in select locations. That rental uplift comes even as headline vacancy remains elevated, underlining the divide between older and newer product.
Industrial space remains constrained, with vacancy at 3.4% and 574,273 square feet of absorption. Nearly 4.0 million square feet of industrial space is under construction, concentrated in the Southeast and Balzac. For employers, that pipeline highlights where future warehousing, logistics and data‑centre jobs—and therefore future labour pools—are likely to concentrate.
Toronto, Montreal, Halifax
Toronto, the country’s largest employment hub, has just delivered CIBC Square II, a 1.5‑million‑square‑foot Class A tower that Colliers calls the last major downtown addition until 2031.
The building helped push core absorption to 2,758,511 square feet in Q1, with central vacancy now 10.3% and overall city vacancy 10.9%. Suburban offices saw modest negative absorption, though landlords continue to deploy incentives and model suites to attract tenants outside the core.
Industrial conditions are among the tightest nationally: vacancy is just 2.5%, with 2,701,778 square feet absorbed and average net rents at $16.29 per square foot. For HR professionals in finance, technology and logistics, limited future office supply and constrained industrial space mean longer‑term, more coordinated workforce and real‑estate planning.
Meanwhile, Montréal and Halifax illustrate divergent, but equally consequential, trends in Colliers Canada’s snapshot. Montréal’s overall office vacancy sits at 17.0%, yet Colliers says a shortage of high‑quality towers has turned the “flight to quality” into a “fight for quality,” with more early lease renewals and average office rents at $19.01 per square foot.
Industrial vacancy in Montréal is 5.8%, with growing construction and rents near $14.04 per square foot, reinforcing the strength of key employment corridors. New supply under construction there points to continued demand from logistics and manufacturing occupiers.
Halifax’s office market continues to stabilise: vacancy has fallen to 7.7%, sublease space is under 0.5% of inventory, and average office rents are $17.71 per square foot, led by downtown Class A assets. Industrial vacancy has risen to 11.1%, but rents are up 3.9% year‑over‑year to $16.01 per square foot and sublease space remains limited, signalling committed occupiers and a market that is gradually expanding its industrial capacity.
A quiet but decisive shift is underway in Canada’s downtown office cores, as high‑profile tech firms move back into physical space and return‑to‑office mandates spread across major employers.
