Canada’s office real estate market posted record-high availability in the third quarter of 2024, according to Altus Group.

Amid continued shifts in workplace preferences and economic pressures, the national office availability rate rose by 50 basis points to reach a historic 18.2%, marking an ongoing trend of rising vacancies, Toronto-based Altus reported in its quarterly Canadian office market update.

The disparity between office types has widened, with demand and rents increasing for class A office space, while class B and class C offices face persistent vacancy challenges.

Quebec City recorded the lowest availability rate in Canada,12.3%. Calgary, despite efforts to reduce unused space, reported the highest rate at 22.6%. Toronto and Vancouver led office construction as 36 projects totalling 5.8 million square feet were underway, with 38% of that space still available for lease.

The surge in hybrid work adoption has caused many businesses to reassess their office needs. Companies now face decisions to downsize, renegotiate leases, or relocate to spaces better suited to hybrid work models. Despite slowing overall demand, newer class A offices remain in high demand, while older class B and C units—particularly in urban centres—are seeing vacancy rates rise as companies seek modernized workspaces.

Calgary’s widely praised Downtown Development Incentive Program has continued to support the removal of vacant office space through adaptive reuse and demolition, adding new residential and hotel spaces to the city. Similar conversion efforts are underway in Edmonton; Ontario’s Kitchener-Waterloo region; London, Ont.; and Toronto, with projects nearing completion.

Amid weakened GDP growth and tightening labour conditions, many companies are reconsidering their office expansion plans. While some businesses are downsizing, others are choosing to stay in their current locations by renegotiating leases or relocating to better-suited spaces.

“The future of work is nuanced, with varied needs across the major markets,” Altus concluded.

The report was authored by Jennifer Nhieu, an Altus senior research analyst, and Ray Wong, the company’s vice-president of data solutions delivery.

Photo: Courtesy of Newmark Canada