Office Market Continued to find its footing in Q2 2025
In its May 2025 Labour Force Survey, Statistics Canada reported that Canadian employment levels remained essentially flat for a second consecutive month. However, the unemployment rate rose 10 basis points (bps) from April to reach 7.0%. Currently there are 1.6 million unemployed people in Canada, a notable increase of 13.8% from one year ago. This is indicative that people are facing challenges finding work in the current labour market, and as such the unemployment rate is anticipated to continue to climb.
In the second quarter of 2025, overall office vacancy was 17.2%, showing minimal change from the previous quarter. Most market segments and asset classes echoed this trend, with one exception: the Central Class A segment. This market witnessed a more pronounced quarter-over-quarter (QOQ) drop in vacancy to 17.3%—a notable shift after more than a year of relatively stable movement, where changes had hovered within a tight ±10 bps range.
Across major Canadian cities, vacancy fluctuations remained modest QOQ, with Calgary once again proving to be the exception. This market continued to see a reduction in vacant office space in large part driven by ongoing conversion projects—transforming commercial office space into other uses, primarily multiresidential. Despite Calgary still holding the highest vacancy rate among Canada’s key metros, it also posted the most significant year-over-year improvement, with vacancy declining by 300 bps.
While the overall office market remained in negative absorption territory this quarter, posting 78k square feet (sf), it was a notable improvement over last
quarter’s figures. Most market segments and asset classes witnessed negative absorption in the second quarter of 2025, although Central Class A stood out
with a robust 650k sf of positive absorption. Notably, this growth was not fueled by new supply, which was limited to just 98k sf. Instead, it came from tenants actively occupying space at a rate that outpaced new vacancies. Across Canada’s major office markets, positive momentum was the theme—except in Montreal, where the arrival of new vacancy continued to outstrip demand, keeping absorption in negative territory.
