A demand gap is widening between premium and standard Toronto office spaces, says a new Colliers report.

Landlords might need to offer extended free-rent periods as an incentive as a flight to quality sustains demand for premier premises. Such features allow institutions to maintain face rates and ensure the long-term success of the property, says Colliers.

“Landlords will need to enhance their amenities to stay competitive,” adds the commercial real estate services company.

In the first quarter of 2024, overall Toronto office vacancy continuing to trend upward, rising 110 basis points year-over-year to 11.6%. Downtown vacancy jumped 120 bps to 12% from 10.8% in the first quarter of 2023.

But class A and AAA vacancy in the Financial District continued to fall, indicating ongoing demand for high-quality spaces.\

Overall rents exhibited aa plateau as vacancy and availability rose together.

Avison Young recently reported that increased GO Transit ridership is not helping to reduce downtown vacancy.