Empty space edged lower in two key categories, according to a new report
Canada’s commercial real estate market appears to pass an important milestone in the first quarter of 2026, with both office and industrial vacancy edging lower for the first time in years, according to new figures from Colliers.
The firm reported a national office vacancy rate of 13.6% and industrial vacancy of 3.5%, each down 100 basis points year over year – a shift that hints at a slowly healing market after the pandemic-era shock.
The retreat followed several years in which office floors emptied out and industrial space swung from scarcity to a mini‑glut. Avison Young’s 2026 Canadian Outlook already highlighted “clear signs of recovery across most asset classes” heading into 2026, even as lenders and borrowers remain wary of higher rates and refinancing risk.
Office vacancies finally retreated
Colliers said that while return‑to‑office policies varied by market and sector, “their cumulative impact is being felt nationwide.” Leasing has become more concentrated in downtown cores, and national net absorption turned positive even as tenants remained selective.
New supply also tightened. Colliers reported “less than 2.0 million square feet currently under development,” compared with an average of 1.8 million square feet delivered per quarter between 2021 and 2023 – a construction pullback that helped vacancies stabilize.
That trend aligned with warnings from Avison Young’s Mark Fieder, who previously told Canadian Mortgage Professional that “the construction cycle is coming to an end. There are no big projects coming in the next few years,” a shift he said would “tighten vacancy” particularly in older Class‑A and A‑minus buildings as tenants ran short of options.
Industrial market moved off the boil
On the industrial side, Colliers said “Canada’s industrial sector experienced a national vacancy rate decline – an outcome not seen since 2022,” with absorption of more than 3.6 million square feet outpacing roughly 3.0 million square feet of new supply.
That cooling, following years of breakneck rent growth and record‑low vacancies, echo other industry tallies: CBRE data showed availability still higher than a year earlier but stabilizing, while rent growth flattened in many hubs.
Commercial investors have been bracing for that moderation. In 2024, JLL’s Scott Figler said rising industrial vacancy and easing rents were “not a negative narrative” but rather “what we call equilibrium,” as new supply finally caught up with tenant demand.
Meanwhile, institutional players are re‑engaging and pricing risk more carefully across office, industrial and mixed‑use assets. Conversions of obsolete offices into rental housing in cities such as Calgary and Ottawa continue to thin out the least competitive stock, supporting values in better‑located buildings.
Still, analysts cautioned that geopolitical tension, tariff uncertainty and elevated borrowing costs could yet slow leasing and investment, even as vacancies eased.
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