Downtown Toronto continues to drive the region’s office recovery, and an increase in leasing activity there could lead to more trophy office buildings trading hands, according to a report.
Overall availability in the region declined to 17.6%, a drop of 160 basis points compared to the previous quarter, according to the Avison Young’s Greater Toronto Office Market Report for the first quarter. In the first quarter of 2025 the overall availability rate was 20.5%.
During the first quarter of this year, tenants leased nearly 2.1 million square feet of office space across greater Toronto, with the downtown market accounting for more than 1.6 million of the activity.
With the strong leasing activity, investment into greater Toronto’s office market will accelerate due to the renewed confidence, Avison Young said in the report. Although institutional-grade building sales softened in recent years, transactions started to close again late last year, and other office properties downtown and in the suburbs are going hit the market soon, the report added.
Among major sales during the first quarter of 2026 were Yonge Corporate Centre and North American Centre, as well as that of 1595 Clark Blvd. in Brampton.
Avison Young said it anticipates that “big-block leasing activity” will decelerate this quarter but overall demand will remain healthy through the remainder of the year.
The sublease market will also see a substantial decline amid scarce availability region-wide, with more than 1 million square feet being absorbed from the fourth quarter, and almost 2 million year-over-year. Direct available space decreased by 1.9 million square feet from the fourth quarter, and by 3.3 million square feet from the first quarter of 2025, marking the decline of availability for a fifth straight quarter, the report said.
There are fewer leasing opportunities in the Financial District for large-block users — especially those looking for Class A space — with rents increasing and landlords making fewer concessions. However, the report said tenants still have plenty of options from which to choose, most of which are in what it called “off-core submarkets."