The GTA's office market is experiencing important shifts in investment sentiment that should provoke optimism, and even bullishness, for the asset class. 

The catch is that those positive signs and activity are mostly happening around transit-oriented, higher-quality office buildings in the central business district (CBD) and in key suburban markets, which are no longer the have-nots when it comes to top office performance.

The signs of positivity can be found in recent deal activity, tenant demand, investor appetite and even renewed financing vigour. But those benefits won't be felt equally as a bifurcation emerges in investment activity, with buyers seeking top-quality offices with strong tenant profiles and great locations, and looking past older, high-vacancy class-B and -C buildings. 

More stable vacancy sets table for stronger investment

Toronto’s office market continues to be anchored by Union Station, with nearness driving pricing power, according to Colliers' latest Toronto office market report. Our data shows that class-AAA core vacancy has dropped to 3.2 per cent from 5.8 per cent two years ago, and class-AAA rents have climbed to $50–$55 per square foot, up 21 per cent since 2020. Overall downtown vacancy inched down to 12.9 per cent year over year, while the suburban rate fell year over year to 12.4 per cent.

No new supply entered the market in Q3 2025 and roughly two million square feet of new office space is being built.  

Demand for office has stabilized across various sectors. We saw eight deals over 100,000 square feet in the quarter, and that will further tighten supply and reduce sublease space. 

This swing to positive has proven enticing for office buyers, and while significant focus has been on a handful of recent successful central business district sales, suburban Toronto has also benefited. 

Sales set higher valuation floor, reveal shift in investor profile

A new, higher valuation floor is being set as we see more deals happen. The back-to-back sales in the last 18 months of a Mississauga office property provide an example. 

5750 Explorer Dr. is a five-storey, 108,218-square-foot office building in Mississauga’s Airport Corporate Centre. Crown Realty Partners bought the asset in October 2024 for $17.4 million, at approximately $161 per square foot. Then, about a year later, the property sold again to Hunter Express, a private investor, for $22.8 million — or approximately $210 per square foot. That’s a 31 per cent increase in value.  

That price increase underscores the opportunity investors are perceiving in the office market as valuations reset and workplace-use trends continue to stabilize.

That deal also shows it’s crucial to market offices more broadly, to include private investors in addition to large institutional buyers and real estate trusts. That’s because we’re seeing rising interest in office from a growing pool of domestic and foreign private investors, entrepreneurs and wealthy families, many of whom can utilize potential vacancy in assets for their own business purposes.

Strategies must catch their attention with comprehensive marketing programs as larger pension funds continue to diversify their portfolios to reduce overall office exposure.  

Another example is a building our team sold in the summer of 2025. A high-net-worth individual bought the recently-built, fully leased class-AAA 1375-1393 North Service Rd. E. in Oakville for approximately $31.13 million, the equivalent of $285 per square foot. That buyer owns a large industrial portfolio totaling approximately 10 million square feet in the U.S. but had never bought an office asset. 

Suburb vs. downtown locations matter less, but quality is key

Recent transactions are pushing up pricing in the CBD and suburban areas, alike. 

Prior to the pandemic, the most attractive office assets were perceived to be in the downtown core; and offices in the suburbs saw less demand. Today, there's an adjustment taking place. While core office investments will hold an important part of many top-tier institutional investors’ portfolio strategies, groups understand the benefits and are willing to pay more for high-quality, class-A offices in suburban cities with great transit connectivity.

Workers have become more decentralized, with many young professionals putting down roots in the suburbs. Some companies, like Fidelity, are embracing a hub-and-spoke office arrangement – they'll have a front-and-centre downtown office space, as well as a suburban location of similar size, where people can work if they don’t want to commute downtown. 

Many of the leasing RFPs from larger corporate occupiers are increasingly focused on sustaining their spaces or expanding their footprints as companies right-size in an effort to provide offices that are enticing, accessible and convenient for their people.   

Investment values are reflecting this change. Buyers are chasing class-AAA and -A offices in the CBD and particularly near Union Station, while investors are also keen on class-A offices in areas like Oakville, Mississauga, Markham and Richmond Hill.  

The challenge remains for owners of class-B or -C offices in less desirable areas to backfill empty spaces and attract investors or refinancing options. Of course, the higher the vacancy in a building, the less desirable the building is for an investor buyer or lender. That said, entrepreneurial owner-occupiers have been finding value in these buildings when the vacancy matches their own space needs. 

Lender activity looking more optimistic for office

Financing the office market is still challenging, but showing more promise. I’m aware of a recent situation where a bank tenant was keen to renew its own lease in a high-quality building in the GTA region; however, that same bank wasn't willing to provide financing to the building owner on the very same asset.

That's kind of ironic, but also illustrative of the challenges we've seen on the financing side for office.  

Now, in the same way we see bifurcation in office demand by investors and tenants, we're also seeing two situations playing out in lending. Lenders in recent years have been chasing multifamily, industrial and retail, and have become underweight in office.  

Many are coming back and want to provide financing for office purchases and projects, but they’re picky. 

Lenders are going to pick winners and losers, seeking only well-located buildings with strong tenant profiles and lengthy weighted average lease terms. The riskier assets are going to be more challenging to finance. 

Why I'm bullish on office 

We should be optimistic – even bullish – on office investment in the GTA. 

We’re seeing more transactions, higher values, stabilized tenant demand and renewed financing activity for office. 

For the first time since the onset of the pandemic, institutional investors are reaching out to understand how to chart a course back to downtown and suburban acquisitions.