Office market continues to gain some momentum
In its August 2025 Labour Force Survey, Statistics Canada reported that Canadian employment levels declined for the second consecutive month, with a decrease of 66,000 jobs, extending the decline witnessed in July of 41,000. With this decrease the unemployment rate climbed to 7.1%; its highest level since May 2016 (excluding 2020 & 2021). Employment in sectors that are office using did decline for the second straight month; although levels do remain higher in comparison to one year ago.
In Q3 2025, overall office vacancy edged down to 16.8%—its lowest level in over a year. This modest improvement was reflected across most submarkets and asset classes, with one exception: the Suburban Class B/C segment, where vacancy rose slightly quarter-over-quarter (QOQ) to 12.4%. Among all segments, the Central Class A market demonstrated the most consistent progress, recording a 50-basis point (bps) decline in vacancy since Q1 2025.
This national trend was echoed across major Canadian cities, where vacancy rates either declined or remained stable compared to the previous quarter. However, variations emerged at the class and node level. While the Canadian Central Class A market posted a QOQ decrease, this pattern was not uniformly observed nationwide—most markets saw vacancy hold steady or shift marginally by 10–20 bps. Toronto stood out in Q3 2025, showing marked improvement in its downtown Class A segment. This strong performance was the key contributor to the overall national decline in Central Class A vacancy.
Net absorption remained positive this quarter, coming in at just under 200k square feet (sf). Following a historical revision to Q2 2025 figures, year-to-date absorption for 2025 has now exceeded one million square feet (msf). Notably, all of this quarter’s absorption was driven by Class A assets—both Central and Suburban—while the combined Class B/C segment across these nodes posted negative absorption. A closer look at Central Class A reveals a pattern consistent with the movement in its vacancy rate: most markets witnessed only marginal shifts in absorption levels from the previous quarter. The standout, however, was Toronto, which recorded substantial 525k square feet (sf) of positive absorption in Q3 2025, making it the primary engine behind the quarter’s overall gains.
