Six of Canada’s ten major office markets recorded positive net absorption in the third quarter of 2024, and suburban space provided much of the improvement. CBRE said the country remained on course for its first full year of positive office demand since 2019, although vacancy stayed historically high.
Net absorption measures occupied-space change
Positive absorption means tenants occupied more space than they vacated during the period, after accounting for moves and new supply. It is not the same as the total area leased, because a company may sign a new agreement while giving up an old office.
One positive quarter can also include a few large moves. A durable recovery requires repeated gains across industries and building types.
Suburbs offered practical advantages
Some employers sought offices closer to where workers live, with lower rents, parking and smaller floor plates. Suburban locations can reduce commuting time for nearby staff and make a hybrid schedule easier to justify.
The advantage is uneven. A car-oriented office may be difficult for younger workers, people with disabilities or households without a vehicle, while downtown locations generally offer stronger regional transit access.
Toronto led the quarterly gain
CBRE recorded more than 650,000 square feet of positive absorption in Toronto, split nearly evenly between downtown and suburban properties. That performance helped offset weaker conditions in several other markets.
Canada’s cities did not move in one direction. Local industry, government employment, construction and return-to-office policies produced materially different outcomes.
Vacancy remained the larger story
National office vacancy was about 18.6 per cent in the third quarter, edging higher despite positive absorption in most surveyed markets. Years of remote and hybrid work had left more space available than tenants required.
Demand also concentrated in newer, well-located buildings. Older properties without modern ventilation, amenities or efficient floor plans faced a deeper challenge even when city-wide numbers improved.
Sublease space was declining
Available sublease inventory fell for a fifth consecutive quarter, suggesting that fewer companies were trying to dispose of excess space obtained before or early in the pandemic. A sublease decline can be an early sign of stabilization.
It can also occur when leases expire or landlords take space back, so it should be considered alongside direct vacancy and actual occupancy.
New construction slowed sharply
Only about 4.2 million square feet of office space was under construction nationally, the lowest total since 2004, according to CBRE. Limited new supply can help existing buildings recover over time.
It also signals weak developer confidence. Projects begun during stronger conditions take years to deliver, making the construction pipeline a lagging response to changed demand.
Office use has not returned to its old pattern
Hybrid work allows a company to keep an office while using less space per employee or concentrating attendance on selected days. Leasing improvement therefore does not imply five-day occupancy or a complete reversal of remote work.
Landlords increasingly compete through flexible suites, amenities and incentives. Headline rent can remain stable while the effective rent falls after free periods and improvement allowances.
The recovery was tentative and selective
Positive demand across six markets and falling sublease availability were credible signs of improvement. The elevated vacancy rate and divide between premium and lower-quality buildings prevented a declaration that the market had normalized.
Suburban gains should likewise be understood as a shift within a changed office system, not the death of downtowns. Employers were testing locations, costs and commuting patterns after the pandemic. The winners would be buildings—and neighbourhoods—that made in-person work useful enough to justify the trip.
