Commercial real estate trends in Canada are changing fast. Many businesses are adapting to new work trends and technologies. One of the biggest changes is how companies are using office space.
Companies are downsizing or moving to suburban areas with lower rents and bigger spaces. The need for large city-center offices is declining, and in its place, there’s a growing demand for more adaptable workspaces.
If you’re curious about what this means for the future of Canada’s commercial real estate market, you’re in the right place. Let’s explore the latest trends and how the demand for office space is evolving.
What is the Outlook For Commercial Real Estate in Canada 2025?
In 2024, commercial property sales in Canada hit their lowest point of the year. Experts expect things to improve in 2025.
Easier financing, abundant investment funds, and the return of big investors will fuel the market’s recovery. Lower mortgage rates will also make it easier for buyers, leading to more property sales.
- The market is splitting into two segments due to shifting demand.
- Class A buildings saw the most leasing activity in 2024.
- By December, tenants had leased a total of 11.6 million square feet in Class A buildings.
- In comparison, Class B had only 2.4 million square feet leased.
- Class C lagged with just 540,000 square feet of leased space.
- This highlights the growing preference for premium office spaces.
Know the Changing Demand for Office Space
The demand for office space in Canada has changed a lot in recent years. This is mainly because of the pandemic and more people working from home. Businesses are rethinking how much office space they need, and this is changing how commercial properties are being used.
1. Remote Work and Hybrid Models
More people are working from home, or in a mix of in-office and remote work (hybrid models). As a result, businesses don’t need as much office space as they did before. Companies are now looking for smaller, flexible offices that can grow or shrink based on their needs.
2. Increased Focus on Flexible Office Spaces
Flexible office spaces are becoming very popular. These include coworking spaces and short-term leases. Businesses like these because they don’t have to commit to long-term contracts. This flexibility is one of the driving forces behind changes in the commercial real estate market.
3. Office Space Rental Trends in 2025
Looking ahead to 2025, the demand for office space will continue to be affected by remote work. More businesses will want spaces that help people work together but don’t need long-term agreements. This will create new opportunities in office rentals and leasing.
Commercial Real Estate Market Trends in Canada
Things like inflation and interest rates also affect the commercial real estate market. In cities like Toronto and Vancouver, the demand for office space is dropping.
However, suburban and rural areas are seeing more interest. These areas offer more affordable rents and larger spaces for businesses.
Some key numbers:
- Downtown office vacancy rates in major Canadian cities are rising. For example, Vancouver’s vacancy rate hit 14% in 2023, and Toronto’s was 12.5%.
- On the other hand, office vacancies in suburban areas are much lower because businesses are picking cheaper spaces outside big cities.
Many companies are moving away from busy city centers and are finding office spaces in suburban and rural areas.
These areas are growing because they offer lower rent prices and more space. They also have less congestion, making them more appealing for businesses that want to save on costs.
For example:
Commercial property demand is increasing in places like Ottawa and Calgary. Many companies are choosing to set up offices in these areas to cut down on costs.
The Future of the Office Space Market in Canada
Looking forward to Canada’s real estate market in 2025, several things will impact office space demand:
Key factors:
- Technology Integration: Offices need smart features like better ventilation, energy efficiency, and tech-driven workspaces. These will become more attractive to businesses.
- Sustainability: More companies are becoming eco-friendly. They will prefer office spaces with green certifications and energy-efficient features.
- Hybrid Work Solutions: The need for offices that can switch between in-person and remote work will continue to grow. This will lead to new office layouts and flexible spaces.
As the demand for office space changes, commercial property investment in Canada is also evolving. Office spaces in big cities may not grow as quickly.
However suburban and rural office spaces are becoming more attractive for investors. These areas have lower vacancy rates and provide stable investment opportunities.
Investors are looking at these regions to find commercial properties with better returns. Also, as Canada’s office space market changes, investors can diversify their portfolios in these growing areas.
Want to learn more? Check out the top real estate brokerage in Canada for advice on these changes.
Conclusion
The commercial real estate industry in Canada is going through a big shift. As businesses continue to adjust to the post-pandemic world, the demand for office space is changing.
Flexible workspaces, hybrid work models, and suburban growth are influencing office leasing trends.
Whether you’re looking for a new office space or thinking about investing in commercial properties, understanding these commercial real estate trends will help you make smart decisions.
Interested in real estate careers? Find out how to become a mortgage broker in Ontario.
