Stronger leasing activity is likely coming for owners of class-A and class-B office buildings in the GTA, but landlords shouldn’t take future tenant demand for granted, and it won’t be experienced equally.   

Toronto’s regional market is normalizing. As demand rises, owners of the city’s non-trophy office stock will benefit from stronger leasing activity – but only those who assess their buildings honestly and make prudent investments will win in a market that remains uneven. 

An “honest” review of an asset means understanding exactly where it’s positioned in the market and both identifying and addressing its strengths and weaknesses to help it stand out to prospective tenants. 

The alternative is that many older buildings, especially ones not located centrally or near transit, will continue to underperform and experience elevated vacancy, thereby declining asset values.

GTA office market moves gradually toward balance

GTA office conditions in the half of this year moved gradually towards a normal market cadence driven mostly by leasing activity in downtown class-A assets, according to Colliers’ National Market Snapshot Q2 2026. 

Overall downtown vacancy rate fell to 9.9 per cent; the first time it's been below 10 per cent in years. 

So far this year, we've seen large commitments and consistent mid-size deals drive most of the demand. There has been expected spillover from class-AAA office absorption onto the -A and -B layers of the market, but the trickledown effect to older offices should not be taken for granted as the market remains highly bifurcated: quality and convenience continue to win.  

Understanding the office classes 

Class-AAA, or trophy offices, are newly built and situated in key locations, with top level amenities and institutional class ownership. 

Separating those trophy assets from class-A and -B buildings depends on several metrics or factors. Class-A, for example, tend to be older buildings that have been extensively renovated and have reliable, responsive ownership; modernized HVAC systems; and desirable amenities in the lobby and other communal spaces. 

As suites become available and tenants turn over, other factors will differentiate class-A from class-B, including the attractiveness of the vacated office. Tenants (and the brokers showing the space) will ask questions like: What condition is the space in? Is it first generation or second generation? Is there a model suite, or are we dealing with a base building? 

Other key questions include: How are the views? What is the access to natural light? Do the building systems work properly? What about the architectural design of the building? (Some older buildings can move up to class-A by having architecturally stylistic appeal). 

The rental rate and deal incentives are always a big differentiator; so too is location. 

Winners made upgrades during the down times 

Office owners that invested in their buildings during softer market conditions in recent years are starting to enjoy the benefits of those efforts to improve lobbies, amenities, esthetics and/or other elements. 

For instance, we saw substantial investments and renovations made at 320 Bay Street; Berczy Square – 33 Yonge St.; 1 Adelaide St E; 121 King St. W. (Roserock Place); 60 Bloor St. E.; 145 King West; and the 68th floor tenant amenity offering at Scotia Plaza.

All these buildings in or around the financial core are benefiting from proactive, strategic improvements. They are now tapping into rising demand amid a stronger office leasing market, and the return-to-office movement across most of the FIRE (Financial, Insurance, Real Estate), TAMI (Tech, Advertising, Media, Information) & HEG (Healthcare, Education, Government) sectors. 

There will be additional activity from tech firms and professional services companies, among other industries, that need more — and better — space to accommodate their workforces, using various types of hybrid and in-office workplace strategies.

Ease of access to a building is more important than ever

Not all buildings, even within the same class, are created equal. We’re learning that convenient access to a building with a favourable location can be more important than a building’s classification. 

Building access has become the most important factor in demand, second only to cost, research from Real Estate Management Services (REMS) shows.

REMS provides an accessibility score based on three key metrics: ease and cost of parking; ease of driving to the building; and transit proximity and convenience. For every one-point increase in the accessibility score, buildings capture an extra five per cent of leasing demand in the market.

Recalling people to the office, and retaining them, has become a central factor in the market. There's a cost for every worker to get to and from the office, both in price and in time. Tenants are considering additional factors like avoiding downtown and freeway gridlock; public safety; and access to food, beverage, retail and social spaces in and around their office buildings. 

A worker's satisfaction and convenience are tied to their productivity. Engagement is crucial. 

Know what you are 

Sophisticated owners will recognize that they are investing in the long-term future of their buildings, either maintaining class-A, or even bumping up a class-B building to a class-A. The biggest problem landlords in these classes face is languishing vacancy. Empty, unattractive space can become a serious drag on the rest of your building.

The key to success is understanding your building's strengths. That requires side-by-side comparison of what the building offers in its current state and identifying investments that can be made to boost its value and attractiveness. 

Identify which renovation or new amenity or new programming will be most welcomed by your current tenants and showcased by brokers. What type of parking does the building provide? What kind of food and beverages are available? What kind of first impression does your lobby create?

Turnkey suites have become highly attractive in a market with tenants reluctant to spend capital on upgrades to make a lease work. 

Your investment might not boost rent, but it could bring your vacancy down from 30 per cent to 20 per cent, or even lower — and many landlords will see that as a win in the non-trophy office race. Simply waiting around for demand in the trophy assets to trickle down to your building isn’t a winning game plan.