Downtown-led rebound tightens trophy supply and reshapes GTA office risk
For the first time in seven years, Toronto’s office market saw more space leased than vacated in 2025 – a turning point that left landlords with less empty space and lenders reassessing risk.
Avison Young’s latest Greater Toronto Area (GTA) report showed net absorption turned positive across the region in 2025 after four straight years in the red, with overall availability edging down to 19.2% from 21.2% a year earlier.
Downtown led the recovery. Availability in the core fell to 17.6%, with vacancy at 15% after nearly 3.5 million square feet of space was leased over the year.
GTA-wide, sublease availability held at 5.4 million square feet – about 16% of total available space – even as direct space quietly shrank. That's the fourth consecutive quarter of declining overall availability.
Similarly, CBRE reported that Canada’s office market hit a turning point in 2025, with 2.2 million square feet of positive net absorption and Toronto leading the gains, primarily downtown.
Reid Quan of ROI Group highlights how “vanilla” asset classes like retail, mixed-use, and industrial may thrive, while high-rise residential and large condo developments continue to struggle amid economic uncertainty.https://t.co/NQuDbZDxwz
— Canadian Mortgage Professional Magazine (@CMPmagazine) January 30, 2026
Banks’ office mandates squeeze trophy supply
One of the strongest demand drivers sat squarely in Bay Street’s backyard. Canada’s biggest banks shifted staff back to the office four days a week in 2025, a move that soaked up large blocks of top-tier space. Financial institutions already occupied roughly 13% of downtown Toronto’s office inventory.
“The impact on the market of a return in person four days a week will be material,” Joe Almeida, principal and managing director at Avison Young, said.
“And considering these occupiers’ large footprints, it will be widespread and not limited to head offices.”
By year-end, vacancy in trophy towers sat at just 3.7% in the GTA, compared with 17.1% overall, as big banks and other blue-chip tenants competed for the best locations around Union Station and the Financial Core.
Large contiguous blocks became notably scarcer, and Avison Young indicated that 2030 is the earliest realistic date for any new, large-scale projects to deliver.
Rents rise as new supply dries up
Tightening conditions at the very top of the market translated into higher rents. In downtown trophy buildings, average asking gross rents climbed to $88.20 per square foot in Q4 2025, up $1.30 quarter over quarter and $7.50, or 9%, year over year. Class A asking rents also pushed higher to $66.10 per square foot.
Those figures built on earlier momentum. In Q1 2025, Downtown Toronto net asking rents hit a seven‑quarter high as positive signs for the downtown market emerged despite broader economic uncertainty.
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