Banks' four-day office mandate drives new demand in Toronto's commercial real estate market

Canada’s largest banks have called time on fully remote work, requiring employees to return to the office four days a week as of September.

With financial institutions occupying an estimated 13% of downtown Toronto’s 82 million square feet of office inventory, the move is set to ripple through the city’s commercial real estate market in ways not seen since the onset of the pandemic.

Joe Almeida, principal and managing director at Avison Young, described the shift as “material” for both head offices and back offices.

“The impact on the market of a return in person four days a week will be material. And considering these occupiers’ large footprints, it will be widespread and not limited to head offices,” Almeida said.

Trophy space tightens as demand surges

The renewed appetite for in-person work is intensifying competition for top-tier office space.

The options for top quality, highly amenitized space are becoming fewer, with a Trophy office vacancy rate of just 3.0%. That's in contrast to 13.0% for Class A and nearly 20% for Class B properties, according to Avison Young Market Intelligence.

With new construction at a standstill except for 141 Bay Street (CIBC Square Phase II), which is expected to be fully leased before completion, banks and other tenants are being forced to look beyond traditional Trophy towers.

“In Q2 2025, Downtown Toronto posted its strongest quarterly leasing activity since Q4 2018,” Almeida said.

“Tenants want to have control of a campus of some sort, and the options are limited, so they're going to have to get creative… and in most cases move quickly.”

Return-to-office strategies evolve

Avison Young has played a central role in helping clients navigate the complexities of return-to-office (RTO) strategies.

“The days when brokers engaged with an employer to provide basic real estate answers are gone,” Almeida said. “Now it's about understanding how your workplace is currently set up. What is your role? Where do you want to be?”

For mortgage professionals, the RTO debate is more than a workplace issue—it’s a market signal. If remote and hybrid work remain entrenched, demand for suburban and exurban properties is likely to stay robust, while urban condo markets may continue to lag.

Productivity, engagement, and the future of work

While the initial productivity gains from remote work during the pandemic have been widely debated, Almeida believes the return to office is about more than just output.

“I think the reason for bringing people back to the office goes beyond productivity. It is about employee engagement and an employee's tenure with a company,” he said.

Not all employers are following suit—some are maintaining hybrid models, using remote work as a differentiator to attract talent. But as banks begin to measure the impact of increased in-person collaboration, Almeida expects more organizations to follow.

Meanwhile, most Canadians in professional, finance, and knowledge jobs aren’t eager to give up remote work. Just 9% would choose to work in the office full-time, while 59% said they’d rather work mostly from home, according to an Angus Reid survey.

Another study also found that women, senior staff, and highly skilled employees are more likely to leave companies with strict return-to-office policies, meaning these firms risk losing top talent.