The Canadian office market is widely considered to be in a state of flux, but recently released data from Avison Young shows that newer spaces are in high demand across the country.

Since the first quarter of 2020, nearly all positive net office absorption has been concentrated in buildings constructed in the 2020s. Meanwhile, older properties, particularly those from the 1980s or earlier, have faced declining occupancy rates.

The flight-to-quality trend has gained momentum as employers seek to entice employees back to the office by offering state-of-the-art facilities and amenities. The COVID-19 pandemic played a significant role in accelerating this shift, with modern office environments now a key focus for organizations aiming to enhance the employee experience and encourage collaboration.

Currently, 5.3 million square feet of office space remains under development in Canada, primarily in major markets like Toronto and Vancouver. The ongoing construction cycle is expected to conclude by 2026, with the majority of these spaces already preleased at rates exceeding 55%.

This high demand for new supply has created a competitive leasing environment, limiting availability in premium buildings.

As the supply of modern office spaces tightens, industry experts anticipate a gradual shift in demand toward older properties, noted Avison Young. Older buildings’ landlords are expected to invest in significant capital improvements to attract tenants, with a focus on upgrading amenities and modernizing interiors to align with the high standards set by newer developments.

This evolving dynamic signals an opportunity for landlords of older properties to remain competitive in a market where quality and employee experience have become top priorities, said Avison Young. For now, however, newer office buildings continue to dominate the landscape, reflecting the growing emphasis on modern workspaces in a post-pandemic world.