CBRE Group, Inc. shared that national office vacancy decreased by 10 basis points (bps) to 18.7 percent, while pre-leasing in buildings under construction remained at around 50 percent nationally in the first quarter of this year.
“The office market was poised for a rebound and while there are pockets of positivity, the office market, like much of the economy, is in wait and see mode,” said Paul Morassutti, CBRE Canada’s chairman, in a press release.
According to CBRE’s Q1 2025 Canada office figures:
- Toronto and Vancouver experienced strong downtown leasing activity
- Downtown vacancy in Toronto went down by 50 bps to 18.5 percent
- Downtown vacancy in Vancouver dropped to 10.7 percent
- Apart from Toronto, Vancouver was the only other Canadian city with significant positive net absorption of office space
- Downtown vacancy in Winnipeg also went down
- Calgary and Halifax saw the biggest suburban improvements
- Calgary and Edmonton had negative net absorption of office space for the first time in seven and six quarters, respectively
- In Calgary, merger and acquisition activity led to consolidated office footprints, with Chevron’s departure affecting the downtown area
- Montreal and Ottawa also faced softer demand
CBRE’s press release noted that the first quarter data did not yet reflect the impacts of the tariffs imposed by US President Donald Trump on office space demand.
“It’s unclear how much renewed momentum there is and to what degree tariff-based uncertainty is affecting decision-making,” Morassutti said in CBRE’s press release. “We should have a better idea in the second quarter of what the tariffs really amount to and how businesses will respond.”
Industrial availability
CBRE’s press release noted that Canada’s industrial markets will more directly experience the effects of tariffs, with many Canadian industrial markets identifying “the ongoing trade conflict as a major headwind that could temper demand in the coming quarters.”
“If there is tariff intrigue in the office market, there is existential concern in the industrial market,” Morassutti said in CBRE’s press release.
CBRE said that its Q1 2025 Canada industrial figures reflected an overall muted first quarter. Specifically, the Q1 figures revealed that:
- The national industrial availability rate reached five percent for the first time since 2016
- Net absorption of industrial space stayed relatively stable and amounted to four million square feet nationally
- Net industrial leasing activity declined from the 10-year quarterly average of six million square feet
- Construction starts dipped to a five-year low of 2.1 million square feet
- The Toronto market alone began a meaningful amount of new industrial projects and accounted for 1.9 million square feet of construction starts
- Over 855,000 square feet in Calgary returned to the industrial market, given the shortage in new supply
“The end of the auto pact and breaking the backbone of the Canadian manufacturing economy is almost too much to contemplate in terms of impacts on market fundamentalism,” Morassutti said in the press release. “Hopefully this doesn’t come to pass, and if it doesn’t, the industrial market is fundamentally healthy notwithstanding the rise in vacancy.”