Key Takeaways
- The national vacancy rate of offices in Canada has decreased to 18% as of the end of 2025, down from 18.7% a year earlier
- Major banks in Canada, such as Bank of Montreal and Toronto-Dominion Bank, are requiring employees to return to the office four days a week, contributing to the decrease in office vacancy rates
- Condo sales in Ontario have fallen to a new low, with only 248 new condos sold in the Greater Toronto Area in the fall, representing a 2% decrease year-over-year
- The drop in condo sales is attributed to a slowdown in federal immigration policies, which has reduced the demand for condos
- The government’s crackdown on immigration is expected to continue, with fewer new residents, students, and temporary workers being accepted in the New Year
Introduction to Canadian Real Estate
The Canadian real estate market is finally showing signs of life, particularly in the office sector, as workers return to the office. According to a report from the Commercial Real Estate Services, the national vacancy rate of offices was 18% at the end of 2025, down from 18.7% a year earlier. This decrease in vacancy rates is a positive sign for the commercial real estate market, indicating that offices are once again in demand. Brian Rosen, president and chief executive officer at Colliers Canada, notes that offices have been the "pickup" that the market saw in the second half of last year, with the best quarter in Q4 for absorption in the last almost eight or nine quarters.
The Return to Offices
Major banks in Canada, such as Bank of Montreal, Toronto-Dominion Bank, Royal Bank of Canada, and Scotiabank, have required their employees to return to the office four days a week, contributing to the decrease in office vacancy rates. Additionally, the provincial government has mandated employees to return to the office five days a week, ending a hybrid model that persisted for more than five years. This shift back to traditional office work is expected to continue, with Rosen predicting that vacancy rates will continue to drop over time as more workers return to offices. The downtown core of Toronto has already seen an almost three per cent drop in vacancy rates, indicating a strong demand for office space in the city.
Challenges in the Condo Market
In contrast to the office sector, the condo market in Canada is facing significant challenges. Condo sales in Ontario have fallen to a new low, with only 248 new condos sold in the Greater Toronto Area in the fall, representing a 2% decrease year-over-year. According to an Altus Group report for the Building Industry and Land Development Association, this decline in condo sales is attributed to a slowdown in federal immigration policies. Canada implemented tighter rules in late 2024 to reduce Canada’s unemployment rate, address housing affordability, and ease pressures on healthcare and other public services. As a result, the demand for condos has decreased, leading to a drop in sales.
Impact of Immigration Policies on the Condo Market
The slowdown in federal immigration policies has had a significant impact on the condo market, particularly in the Greater Toronto Area. The decline in non-permanent residents, including international students and temporary workers, has reduced the demand for condos. Rosen notes that the "tanking of the condo market" is a complicated situation, with the lack of demand contributing to the decline in sales. The Greater Vancouver Area has also seen a drop in condo prices, down 5.3% year-over-year. The government’s crackdown on immigration is expected to continue, with fewer new residents, students, and temporary workers being accepted in the New Year, which is likely to further impact the condo market.
Outlook for the Condo Market
Despite the challenges facing the condo market, Rosen is hopeful that demand will bounce back. While he expects condo sales to continue to drop in 2026, he notes that there are signs that the market is nearing a bottom. However, distress is still expected in 2026, indicating that the condo market will likely face continued challenges in the coming year. The government’s immigration policies will likely continue to play a significant role in shaping the condo market, and it remains to be seen how the market will respond to these changes. Nevertheless, Rosen’s optimism suggests that there may be opportunities for growth and recovery in the condo market, particularly if demand begins to pick up.
