UPDATED WITH OXFORD COMMENT: Toronto’s overall office availability rate remains at an elevated 20.1 per cent, and leasing rates have softened slightly during 2025. But Avison Young's latest office report notes conditions might soon be ripe for a major new downtown office tower.

The Q2 2025 Toronto office report states that with the completion of the 466,600-square-foot EQ Bank Tower during Q2, only one major office tower remains under construction — the 1.4-million-square-foot CIBC Square Phase II.

A series of recent major building completions have contributed to the elevated vacancy figure. Toronto has added over 11 million square feet of new — almost exclusively premium — office space since 2020. That has raised its inventory to about 179 million square feet in a sector that had been surging prior to the COVID-19 pandemic, the work-from-home trend and, now, economic uncertainty. 

Thus, any additional future absorption could quickly result in a shortage of premium space — i.e. trophy or even class-A properties.

“No major new office tower projects have been announced in Toronto since before the pandemic, and although overall vacancy remains at 17.2 per cent, the ongoing flight to quality that has been evident in the office market in recent years means that demand for new, trophy-class assets outpaces that for buildings considered class-A or below,” the report states.

Given the timeline for getting approvals and building a new office tower, that means no more new space is in the offing for five or more years.

“While there’s no indication that a new office tower will begin construction anytime soon, if one were to start in 2025, it likely wouldn’t be delivered until 2030,” according to AY’s Ontario managing director Joe Almeida, in a written reply to questions from RENX.

Demand remains for premium Toronto office space

One major factor in this prospect is the vast gulf between vacancy in the city’s newest and best office towers, and those at the lower end of the scale. It's also notable that total availability, while still at 20.1 per cent, did decline 40 BPS quarter-over-quarter.

“The flight-to-quality trend remains strong in downtown Toronto,” Almeida wrote. “Companies are prioritizing locations near transit and rich in amenities to help attract and retain top talent. As more firms shift their focus toward increased in-office presence, being close to transit can make the transition easier for employees by reducing commute times.”

The availability rate for trophy office space is six per cent, with 2.4 per cent of that sublet space. For class-A space, the rate is 22.9 per cent, followed by 20.6 for class-B and 13.1 for class-C (though this constitutes a much smaller percentage of overall inventory).

The flight to quality has created some significant openings in class-A and -B buildings as former tenants have moved into newer properties, many of which have yet to be replaced by new leasing. With several major banks and other employers tightening return-to-office mandates, office vacancy could continue to fall — although concern about deteriorating economic conditions could counter-balance that.

As premium space fills up and leasing rates rise, that would push other tenants into class-A or even higher-quality class-B space, lowering that vacancy rate as well.

Oxford's The Hub a possible solution?

If a new project does go into the ground anytime soon, Almeida speculated on one possible location.

“Given current market dynamics and the demand we are seeing, if a large office tower moves ahead, it will most likely be downtown. The leading candidate today is likely Oxford Properties’ 30 Bay Street (The Hub) in the Downtown South area.”

The proposal there is for a 1.4-million-square-foot tower rising almost 60 storeys which was first proposed in 2018. In a LinkedIn post a few months ago, however, Oxford senior vice-president, development leasing John Peets fuelled speculation by suggesting the tower could soon be under development.

"Visionary CEO’s - thinking ahead, as AAA space in downtown Toronto gets tighter than it already is (<6% available), my advice to you is renew your lease for 5 years. By doing so, your timing will be perfect for the delivery of the HUB at 30 Bay Street," he wrote.

An Oxford spokesperson, replying to questions from RENX, said it continues to move the project forward.

"The Hub is an exciting shovel-ready vision for best-in-class office in the heart of downtown Toronto, with a generational opportunity to further enhance Toronto’s iconic skyline. There has been strong interest from potential tenants, with our teams advancing discussions to make this visionary project a reality," the spokesperson wrote.

"Oxford remains steadfast in our long-term view that high-quality, well-located office properties will continue to outperform, with a committed focus on Canada where our portfolio continues to benefit from the bifurcation of the sector and the ensuing flight to quality."

Other key Toronto office stats

Some other data from the AY report:

• of the 35.9 million square feet of available space on the market, approximately 5.6 million square feet is sublease space;
• total sublease space on the market declined by 70,000 square feet during the quarter;
• there were 210 GTA buildings with more than 50,000 square feet available, down slightly from 212 in Q1;
• AY described Q2 leasing as "strong," with the total leased area across the GTA up nearly 900,000 square feet, with gains in downtown, midtown and Toronto west;
• availability in downtown Toronto fell 170 BPS quarter-over-quarter (70 BPS year-over-year) to 19.1 per cent. Vacancy declined 110 BPS during the quarter – but rose 50 BPS year-over-year – to 15.6 per cent.