Widespread RTO Mandates to Spur Tight Office Market Conditions
By: Monte Stewart, February 27, 2026
Return-to-office mandates across Canada are expected to tighten office-market conditions in major cities this year, according to a new report from Royal LePage Commercial.
The brokerage said the office sector continues to evolve as long-term pandemic impacts and shifting workplace strategies reshape how and where businesses operate heading into 2026.
“Much like the residential real estate sector, broader economic uncertainty has weighed on commercial real estate decision-making in recent years,” said Matt Jacques, interim general manager at Royal LePage Commercial. “What’s different heading into 2026 is the growing sense of stability. Businesses are no longer reacting to every economic headline and are instead taking a more deliberate, long-term approach to space planning and investment decisions.
“While caution remains, there is optimism that market conditions are beginning to normalize.”
Royal LePage said rising in-office attendance is helping to stabilize downtown markets that were hit hard by remote and hybrid work models. Major employers, including banks, telecom companies and the federal government, have implemented three-, four- and five-day in-office schedules, supporting leasing activity in 2025 and into 2026.
“The past two years have been pivotal for the office sector, which has steadily regained momentum following the unprecedented disruption of the pandemic, when downtown cores saw office towers largely empty during lockdown periods,” said Jacques. “The market is not returning to its pre-pandemic form; rather, it is evolving into something more deliberate and intentional. Employers are placing greater emphasis on how space can be used rather than how much space they take up, prioritizing layouts that support collaboration, flexibility and employee experience. That shift is increasingly shaping leasing decisions across the country.
“While hybrid-work models will remain part of the equation long-term, rising in-office attendance and clearer workplace strategies are helping to bring greater stability to the market.”
According to a survey of Royal LePage Commercial market professionals, 66% expect occupier demand for office space to increase modestly or remain stable in their market in 2026, with 5% forecasting a significant increase. Meanwhile, 42% anticipate vacancy rates will decline this year.
Regionally, performance varies.
In the Greater Toronto Area, vacancy rates in most office asset classes declined year-over- year in 2025. Wil Irons, senior vice-president of commercial leasing and investments at Royal LePage Signature Realty, said demand for premium downtown office space has strengthened.
“The push by banks, government offices and tech companies to bring employees back into the office more frequently has turned the tides in Toronto’s office-leasing market over the past year. Demand for high-quality office space in the downtown core has increased noticeably, with major companies such as Wealthsimple, Lyft and Nvidia securing significant square footage in 2025,” he said.
“With many new office development projects shelved during the pandemic, limited new supply is expected to come online in the near term, supporting the continued recovery of Toronto’s office market. On the other hand, class B and C office spaces in the downtown core are likely to face ongoing softness as tenants gravitate toward higher-quality assets, creating a K-shaped recovery in the market.”
In Montreal, class A office space continues to outperform lower-tier assets.
“Class A office leasing continues to outperform class B and C spaces, as employers prioritize high-quality environments with attractive amenities, and that support collaboration and employee experience,” said Georges Renaud, a commercial and residential real estate broker at Royal LePage du Quartier.
“This demand has helped prevent rental rates for class A office space from declining, even as pressure persists elsewhere in the market. At the same time, capacity constraints are emerging, as some employers lack expansion plans or sufficient space to accommodate a full return to the office. Supported by Montreal’s strong employment base, competition for larger, well-located and amenity-rich office space is expected to remain high, keeping pressure on the upper end of the market.”
In Vancouver, downtown office conditions remain soft, with landlords offering incentives to attract tenants.
“Vancouver’s downtown office-rental market has remained soft in the post-pandemic period, with the greatest pressure on larger office buildings as companies reduce their footprints and continue using hybrid working models. As a result, downtown landlords are increasingly offering incentives, such as discounted rental rates and extended rent-free periods to attract tenants,” said Raman Bayanzadeh, principal of the CRE investment and development team at Royal LePage Sussex.
“The silver lining is that current market conditions present a compelling opportunity for office tenants to secure high-quality space in desirable buildings. Many tenants are being selective and taking a measured approach, with more price-sensitive users waiting for clearer signals that the market has reached its bottom before committing.”
In Ottawa, a federal requirement that public servants work in the office four days per week beginning in July is expected to influence leasing trends.
“In the near term, softness in the office market is expected to persist as tenants and landlords adjust to this transition,” said Luigi Aiello, a commercial and residential sales representative at Royal LePage Team Realty. “Looking ahead, increased in-office attendance is likely to support modest growth in rental rates and place downward pressure on vacancy levels. However, the federal government’s commitment to reducing the size of its workforce through retirements and attrition is expected to temper the pace of recovery, keeping overall market growth measured.”
In Calgary, vacancy rates in all office asset classes declined year-over-year in 2025, signalling stabilization.
“As 2026 unfolds, Calgary’s commercial real estate market is showing clear signs of stabilization and measured growth, presenting opportunities for investors and business owners,” said Maxine Morrison, executive vice president and real estate advisor, Royal LePage Benchmark. “Calgary has largely normalized its workplace strategy. Return-to-office mandates are no longer the primary driver of leasing activity. Companies are focusing on rightsizing, optimizing, and designing spaces that enhance collaboration and employee engagement.”
The shift is evident in the increasing demand for premium, productivity-focused spaces and the repurposing of older office inventory,” she added.
“The market is seeing companies adapt their strategies to foster environments that strengthen culture and visibility, with small- and mid-sized enterprises actively seeking scalable, flexible spaces to support ongoing growth,” said Morrison.
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