Flight to Quality Continues Across Canada’s Office Sector

CoStar’s new forecast sees Canadian office vacancies easing through 2028, with high-end buildings leading and new construction slowing sharply.

See more from StockTitan in Google Search and AI answers. Adds StockTitan as a preferred source · opens Google

Add on Google Not now

New forecast shows vacancy and rent growth will post the best results in higher-end assets

ARLINGTON, Va.--(BUSINESS WIRE)-- Canada's overall office vacancy rate is expected to decline steadily through 2028, with higher-end buildings continuing to significantly outperform the rest of the market, according to a new forecast from CoStar Group, the leading global provider of online real estate marketplaces, information and analytics in the property markets.

The national office vacancy rate peaked at 10.4% in the second quarter of 2025 and has since fallen to 9.8% in the second quarter of 2026, as net absorption has turned positive and new deliveries have all but stopped in the same period. CoStar's updated forecast calls for the total vacancy rate to continue declining, reaching 9.3% by the end of 2027 and 8.7% by the end of 2028 – both improvements from the firm's previous forecast of 10% and 9.4%, respectively, reflecting somewhat stronger absorption than previously expected.

The forecast decline in vacancy will be driven primarily by a thin construction pipeline rather than a surge in demand. Net absorption is expected to remain modest by historical standards, averaging 1 million square feet per quarter in 2027 and 1.75 million square feet per quarter in 2028. Net deliveries, however, are expected to fall quickly following a delivery peak in 2026 – led by the second phase of CIBC Square in Toronto – to just 200,000 square feet by the end of 2027.

“The story in the office sector today is really a tale of two markets,” said Mario Lefebvre, chief economist for Canada at CoStar Group. “Higher-end assets have posted positive net absorption averaging 1 million square feet per quarter since the second half of 2021, while absorption in all other office assets combined was deeply negative over that same stretch – though it, too, has turned positive since the second half of 2025.” Rent growth for higher-end assets is forecast to reach 4%, compared with an average of about 2% for all other assets combined.

“The balance of risks in this forecast remains tilted to the downside,” Lefebvre said. “Trade and tariff uncertainty, higher fuel costs, and a declining population could further weigh on the economy and alter expected absorption results. Over the longer term, however, we expect equilibrium to be restored in the Canadian office sector as demand for office space grows in tandem with the broader economy and the development pipeline remains modest.”

The full forecast can be found here.

About CoStar Group

CoStar Group (NASDAQ: CSGP) is a global leader in commercial real estate information, analytics, online marketplaces, and 3D digital twin technology. Founded in 1986, CoStar Group is dedicated to digitizing the world’s real estate, empowering all people to discover properties, insights, and connections that improve their businesses and lives.

CoStar Group’s major brands include CoStar, a leading global provider of commercial real estate data, analytics, and news; LoopNet, the most trafficked commercial real estate marketplace; Apartments.com, the leading platform for apartment rentals; Homes.com, the fastest-growing residential real estate marketplace; and Domain, one of Australia’s leading property marketplaces. CoStar Group’s industry-leading brands also include Matterport, a leading spatial data company whose platform turns buildings into data to make every space more valuable and accessible; STR, a global leader in hospitality data and benchmarking; Zonda, a leading provider of data, analytics, software, and marketplace solutions for the residential construction industry; Ten-X, an online platform for commercial real estate auctions and negotiated bids; and OnTheMarket, a leading residential property portal in the United Kingdom.

CoStar Group’s websites attracted over 118 million average monthly unique visitors in the second quarter of 2026, serving clients around the world. Headquartered in Arlington, Virginia, CoStar Group is committed to transforming the real estate industry through innovative technology and comprehensive market intelligence. From time to time, we plan to utilize our corporate website as a channel of distribution for material company information. For more information, visit CoStarGroup.com.

This news release includes "forward-looking statements" including, without limitation, statements regarding CoStar's expectations or beliefs regarding the future. These statements are based upon current beliefs and are subject to many risks and uncertainties that could cause actual results to differ materially from these statements. The following factors, among others, could cause or contribute to such differences: the risk that economic conditions adversely affect demand for office space, resulting in higher vacancy rates than forecast. More information about potential factors that could cause results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, those stated in CoStar’s filings from time to time with the Securities and Exchange Commission, including in CoStar’s Annual Report on Form 10-K for the year ended December 31, 2025 and Forms 10-Q for the quarterly periods ended March 31, 2026, June 30, 2026, and September 30, 2025, each of which is filed with the SEC, including in the “Risk Factors” section of those filings, as well as CoStar’s other filings with the SEC available at the SEC’s website (www.sec.gov). All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20260914659483/en/

Media Contact:
Matthew Blocher
CoStar Group
(202) 346-6775
mblocher@costar.com

Source: CoStar Group

Key Terms

vacancy rate technical

Vacancy rate is the percentage of rentable space or units in a property or portfolio that are unoccupied at a given time, calculated by dividing empty units or square footage by the total available. For investors it signals how much rental income is being lost and how strong demand is—high vacancy is like many empty seats in a theater, suggesting lower cash flow and higher risk, while low vacancy implies steady income and healthier asset value.

net absorption technical

Net absorption measures how much usable commercial space becomes occupied or vacant over a set period by subtracting space vacated from space newly leased; it is essentially the net change in occupied square footage. Investors care because it shows real demand for properties—rising net absorption is like water flowing into a bucket (more tenants moving in), which tends to support higher rents and property values, while falling absorption signals weakening demand.

net deliveries technical

Net deliveries is the count of goods or units a company transfers to its customers during a reporting period after subtracting returns, cancellations or other adjustments that reduce the total actually handed over. For investors, it shows the company’s true sales momentum in units — like counting how many cars actually drove off the lot after factoring in refunds — rather than just orders or production figures.