Executive says continued recovery is likely ahead for the space in 2026
Prospects for Canada’s commercial mortgage space are set to improve this year – and the outlook for office is “very bright,” according to a prominent executive in the sector who sees a continued resurgence for the market ahead.
With fully remote working arrangements fading into memory as companies quietly step up efforts to bring employees back to the office, major city centres – most prominently Toronto – are seeing fresh interest in prime office space, Avison Young Canada president Mark Fieder (pictured top) told Canadian Mortgage Professional.
That should continue a reversal of a trend that saw investors flood out of the office market as businesses shuttered their doors during the COVID-19 pandemic.
“I’ve been telling people for a couple of years that when investors are running for the doors on office, that’s when you should be buying,” Fieder said. “You can see in downtown Toronto a marked difference in foot traffic this year already.
“A lot of [companies] have mandated three to five days a week coming back. So what’s happened is office fundamentals are changing rapidly across the country.”
Toronto witnessing strong demand for office space
Vacancy rates for top-tier office buildings in Toronto have plunged, currently sitting at under 2%, according to Fieder, with rates surging in landlords’ favour.
And improved uptake and interest in the city’s office space is happening “right across the board,” he said, with absorption on a steady climb.
The total availability rate of office space in the Greater Toronto Area was 19.5% in 2025’s third quarter, Avison Young’s latest office market report showed, down from 20.1% the prior quarter.
The number of GTA buildings with more than 50,000 square feet available also dropped – falling from 210 in the second quarter to 204 in Q3 – while a complete drop-off in new office building completions also looks likely to put downward pressure on vacancies.
Overall, the outlook for absorption hasn’t looked this strong since before the pandemic, Fieder said. “We haven’t seen absorption levels like this for six years.
“So that’s improving leasing fundamentals in favour of landlords, which in turn is improving people’s outlook on office and now we’re seeing that there are buyers for office.”
Major companies have helped boost confidence in the office space through high-profile acquisitions, such as Desjardins’ decision to scoop up 70 York Street in downtown Toronto – once the home of HSBC in Canada – for a cool $134.6 million from KingSett.
Office market bifurcation a continuing trend
While top-quality office space is being quickly snapped up, what of the so-called C-class inventory out there – typically older product with dated architecture and finishes, sometimes located outside the prime business districts, with fewer amenities and services?
Vacancy levels for those office types are unsurprisingly higher than for trophy buildings, but Fieder doesn’t see them as a particular cause for concern.
“C-class is a blip on the radar. When you look at the amount of C-class space that there is in Canada, it’s very low,” he said. “And a lot of it by market is being converted to residential. You look at the west end of Calgary, where buildings are trading and they’re being converted to residential.
“They’re smaller floor plates, they’re older, they lend themselves to residential conversion, so that’s working its way through the market.”
And the broad national outlook for all office space remains positive, Fieder said, even if performance is likely to vary somewhat from one market to the next.
“Is every market equal? No,” he said. “Montreal, I feel, is lagging a little bit behind Toronto but it’s coming there as well. Vancouver is tight as a drum for space. If you have a large user that needs space in Vancouver and they want to be in one of the better buildings, they have nowhere to go. It’s that tight.”
This article is part of CMP’s Commercial sector focus for January, spotlighting the commercial mortgage market and the key trends and issues facing the space in 2026. Find all the rest of our special coverage here.
