What Happened

A new report from commercial real estate services firm CBRE confirms that Canada's office market has officially completed its first full year of recovery since the pandemic disruption. Published on July 6, 2026, the data reveals that the national office vacancy rate fell to 17.1 per cent in the second quarter, a notable improvement from 18.7 per cent a year earlier. This decline marks a significant milestone for a sector that has struggled with elevated vacancy levels for several years.

The recovery is being driven by four consecutive quarters of positive net absorption nationwide, totaling 1.2 million square feet. Toronto, Calgary, and Montreal led these gains, with each city absorbing more than 300,000 square feet of office space in the second quarter alone. Marc Meehan, CBRE Canada's research managing director, stated that the recovery began in earnest about 12 to 18 months ago and is now supported by hard data.

Fundamental shifts in workplace policies are underpinning this trend. Major Canadian companies announced plans for a four-day in-office work week last summer, and governments have increased in-office days for their workers. Consequently, nearly all Canadian cities saw tightening inventory in the second quarter, with all classes of office space recording declining vacancy rates. While Class A trophy buildings were the primary beneficiaries of the first stage of recovery, vacancy rates for Class B and C spaces are now starting to improve.

Why It Matters

The completion of a full year of recovery signals a stabilization in the commercial real estate sector, which has been a critical component of the broader Canadian economy. For property owners and investors, the data indicates that the worst of the pandemic-induced vacancy crisis is likely over, as demand begins to catch up with supply. The improvement in Class B and C vacancy rates suggests that the recovery is broadening beyond just premium assets, potentially increasing liquidity and transaction volumes for older office buildings.

However, the report also highlights that the road to full normalization is long. CBRE projects that it will take until about 2030 for the office market to return to pre-pandemic levels. This extended timeline is due to vacancy rates remaining elevated and the gradual nature of demand returning. Stakeholders must prepare for a prolonged period of adjustment rather than an immediate V-shaped rebound.

The tightening inventory across nearly all cities suggests that landlords have the leverage to negotiate better terms, potentially stabilizing rents. This shift could encourage more development activity or redevelopment projects, particularly for underutilized Class B and C buildings, as the economics of conversion and renovation become more viable.

Local Vancouver / Burnaby Context

While the CBRE report focuses on national trends with specific data for Toronto, Calgary, and Montreal, the broader Canadian office market dynamics are relevant to the Greater Vancouver area. Vancouver's office sector has historically mirrored national trends but often with a lag or unique local factors such as international investment flows and local zoning regulations. The tightening inventory and declining vacancy rates seen in major Canadian hubs suggest a similar, albeit potentially slower, recovery trajectory for Vancouver.

For Burnaby and Vancouver, the shift toward four-day in-office work weeks and government mandates could impact demand for secondary office spaces and co-working facilities. The improvement in Class B and C vacancy rates nationally may indicate opportunities for adaptive reuse projects in these municipalities, where older office buildings could be converted to residential or mixed-use developments. However, specific Vancouver or Burnaby vacancy data is not provided in this report.

Local context also includes the broader economic environment, such as mortgage rates and housing market conditions, which influence commercial real estate investment. While fixed mortgage rates follow oil prices, the stability in the office market could provide a counterbalance to residential market volatility. Investors and developers should monitor local zoning bylaws and development application processes, as these will determine the feasibility of any redevelopment projects spurred by the office recovery.

Market Impact

The reported recovery is likely to boost confidence among commercial real estate investors and lenders. With vacancy rates falling and net absorption positive, the risk profile of office assets is improving, potentially leading to lower capitalization rates and higher property values. This could stimulate transaction activity, particularly for Class B and C buildings that are now showing signs of improvement.

For tenants, the tightening inventory in major cities may reduce the availability of prime space, potentially leading to rent increases or more stringent lease terms. Companies may need to act quickly to secure space in Toronto, Calgary, and Montreal, where demand is strongest. The shift to four-day in-office work weeks could also lead to a demand for more flexible or high-quality office environments, favoring Class A buildings.

The projection that full recovery will not occur until 2030 suggests that the market will remain in a state of gradual improvement rather than rapid growth. This extended timeline may lead to continued caution among some investors, particularly those with shorter investment horizons. However, the solidification of the recovery trend provides a more predictable environment for long-term planning and development.

Builder / Developer Perspective

For builders and developers, the recovery in the office market presents both opportunities and challenges. The improvement in Class B and C vacancy rates may make adaptive reuse projects more feasible, as the economics of converting older office buildings to residential or mixed-use uses become more attractive. However, the extended timeline to full recovery means that developers should plan for a gradual market improvement rather than a sudden boom.

Financing for office projects may become more accessible as the sector stabilizes, but lenders will likely remain cautious given the historical volatility. Developers should focus on high-quality, flexible office spaces that cater to the new four-day in-office work week trend. Additionally, the tightening inventory in major cities may limit the availability of suitable sites for new development, increasing land costs.

The report's emphasis on the slow return to pre-pandemic levels suggests that developers should adopt a long-term perspective, focusing on sustainable demand drivers such as hybrid work policies and government mandates. Collaboration with tenants to create adaptable spaces may also be key to securing long-term leases and ensuring project viability.

BurnabyHouse Insight

The CBRE report confirms that Canada's office market is no longer in crisis but is in a slow, steady recovery phase. For local readers in Burnaby and Vancouver, this means that while the immediate panic over office vacancies is subsiding, the market will not return to normalcy for several years. Investors should focus on the improving fundamentals of Class B and C assets, which offer potential value-add opportunities. Developers should consider the long-term implications of hybrid work policies and the potential for adaptive reuse projects. The extended timeline to 2030 requires patience and a strategic approach to investment and development in the commercial real estate sector.