Canada\u2019s commercial real estate sector could be at a turning point after the national vacancy rates for both office and industrial properties simultaneously declined for the first time since 2020, a new analysis has found.<\/p>\n
The report from Colliers International said the national office vacancy rate was 13.6 per cent in the first quarter of 2026, down one percentage point year-over-year and marking one of the most significant improvements since the COVID-19 pandemic.<\/p>\n
Canada\u2019s industrial market, meanwhile, recorded its first national vacancy decline since 2022, down to 3.5 per cent.<\/p>\n
The report said these trends suggest the commercial real estate market as a whole is moving toward a more balanced environment.<\/p>\n
\u201cIt was quite unprecedented how long, especially office vacancy, went up,\u201d said Adam Jacobs, head of research for Colliers Canada, in an interview.<\/p>\n
\u201cIt was a good five or six years of rising rates … but the return-to-office momentum we\u2019ve seen, especially in Toronto, has been very rapid in the last six months and it\u2019s really turned the market around quite quickly.\u201d<\/p>\n
He said leasing demand is still concentrated primarily in the \u201cbest of the best\u201d buildings, and it could take some time for that momentum to trickle down to other less coveted properties.<\/p>\n
Toronto and other major urban centres in Canada are still working through an oversupply of existing office space after a post-pandemic surge of completions, said Ben Haythornthwaite, CoStar Group\u2019s director of market analytics.<\/p>\n
\u201cThe office market is like if you had a patient in the intensive care ward, they\u2019ve now moved into the general ward,\u201d said Haythornthwaite.<\/p>\n
\u201cIt\u2019s still sick, but it\u2019s not getting any worse and that\u2019s why we\u2019re seeing vacancy tighten up.\u201d<\/p>\n
While many companies have moved their employees back to the office for at least part of the week, inventory growth is grinding to \u201ca near-total halt,\u201d the Colliers report said.<\/p>\n
Less than two million square feet of new office space is currently under construction, marking a major downswing from the period of 2021 to 2023. Each quarter during that stretch, an average of 1.8 million square feet of new supply was delivered nationally.<\/p>\n
The slowdown in new office builds means Canada is unlikely to see any meaningful supply gains before the end of the decade, given that construction can take roughly three to seven years per project, said Veritas Investment Research analyst Shalabh Garg.<\/p>\n
He predicted vacancy rates will continue falling, especially as more office space is also converted for residential use, but won\u2019t reach pre-pandemic levels.<\/p>\n
\u201cFive to 10 per cent vacancy rate is what\u2019s optimal, but it\u2019s hard to see us getting there,\u201d he said, noting the last time construction activity was this slow was the early 2000s.<\/p>\n
\u201cWe would need to see lots more conversion of older office space into some different use.\u201d<\/p>\n
On the industrial side, Jacobs said the market is coming back strong from a brief shock caused by tariffs and trade uncertainty last year.<\/p>\n
Market absorption outpaced new supply in the quarter, with more than 3.6 million square feet newly taken up, compared with three million square feet delivered, according to the report.<\/p>\n
Jacobs said the trend shows the market is stabilizing after inventory had been piling up.<\/p>\n
\u201cAnywhere you live, you can notice a lot of new warehouse space was built in the last five years and there is just kind of a natural cycle to every market,\u201d he said.<\/p>\n
\u201cIt takes a while to absorb it. But I think we\u2019re kind of through the other side of that in both the office market and the industrial, where a lot was built, it was difficult to build it all and now the building is really slowing down and we\u2019re starting to see those spaces fill up.\u201d<\/p>\n
Colliers said industrial construction starts were resilient in the first quarter, with 5.6 million square feet of new projects breaking ground. Toronto, Vancouver, and Calgary drove 76 per cent of all new starts.<\/p>\n
\u201cFor the most part, I think we\u2019re going to continue seeing demand increase for industrial space and we will see that space absorbed,\u201d said Haythornthwaite.<\/p>\n
He said industrial markets should continue tightening in the coming years, however the looming renegotiation of the Canada-United States-Mexico Agreement continues to cast a shadow of uncertainty in the short-term.<\/p>\n
\u201cI think we\u2019re probably going to see a slowdown in leasing over the next couple of months, just while people wait and see what happens with that because we\u2019re getting so close to it now,\u201d said Haythornthwaite.<\/p>\n
This report by The Canadian Press was first published April 20, 2026.<\/p>\n
Sammy Hudes, The Canadian Press<\/p>\n","protected":false},"excerpt":{"rendered":"Canada\u2019s commercial real estate sector could be at a turning point after the national vacancy rates for both…\n","protected":false},"author":2,"featured_media":11335,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[525,17,1720,113],"class_list":{"0":"post-11334","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-canada","8":"tag-business","9":"tag-canada","10":"tag-construction","11":"tag-politics"},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts\/11334","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/comments?post=11334"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts\/11334\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/media\/11335"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/media?parent=11334"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/categories?post=11334"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/tags?post=11334"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}