GTA office has flipped from a demand problem to a supply problem — a dead pipeline hands trophy and Class A landlords a multi-year pricing runway

Interest rates

Rent performance split cleanly by tier this quarter. Cushman & Wakefield's downtown Class A quoted net rent reached $43.20 psf — the first sustained growth since the series flatlined in mid-2020 — while its Class B and C averages sat near $31 and $28 psf with growth still effectively flat. JLL reported Trophy gross rents rising for a fourth consecutive quarter to $88.93 psf, and Class A net asking rents up 3.9% quarter-over-quarter led by a 7.5% jump in the Financial Core. The averages tell the opposite story: JLL's Urban Toronto average net asking rent slipped 0.5% on the quarter, and Colliers' GTA weighted-average net rent fell 4.3% year-over-year — a composition effect Colliers attributes to lower-tier space entering the market as the best space leases up.

Vacancy

Downtown vacancy fell for a fourth consecutive quarter — Cushman & Wakefield at 14.4%, a three-year low, and CBRE's downtown rate at 13.4% after 120 bps of quarterly improvement. Headline GTA prints still span coverage universes, from Colliers' 10.9% on a broad 260M sf inventory to JLL's 18.6% on a tighter institutional set, so direction matters more than any single number. The class split is the real story: Newmark puts downtown headlease (direct) vacancy at 7.2% for Class A against 15.8% and 16.7% for Class B and C, and Avison Young shows Trophy availability of 4.2% against 20.1% for Class B. Sublet space keeps burning off — JLL counts a ninth consecutive quarterly decline, to roughly 2.6M sf. The suburbs are genuinely disputed: CBRE has suburban vacancy rising to 21.0% while Avison Young reports it falling 130 bps to 17.4% — different building universes, opposite signs.

Demand

Net absorption was positive on every broker's count, but the magnitude is measurement, not market: Colliers booked 2.57M sf of GTA absorption with roughly 1.5M sf of it from CIBC Square Phase II reaching full occupancy, and CBRE called its 2.13M sf of downtown absorption the largest in its recorded history — while Cushman & Wakefield (312K sf) and JLL (241K sf), which treat the tower differently, show the modest underlying run-rate. On who is leasing: CBRE counts over 1.6M sf of net new bank leasing downtown as the Big Five re-established their footprints, and reports the technology sector — Amazon and Uber both active — is now the largest source of the roughly 2.7M sf of current tenant demand. The suburbs did not participate: suburban absorption was negative on both CBRE (-230K sf) and JLL (-210K sf) counts.

Supply

Nothing was completed this quarter on any broker's count, and the pipeline behind CIBC Square Phase II is nearly empty. CBRE counts just 396K sf of downtown office set to complete by 2030; Newmark measures roughly 1.5M sf under construction downtown, all of it pre-leased. A tower started today would deliver into 2030–31 — a gap Newmark calls the first of its kind since at least 2009. The market's own construction signal is flashing: the Financial Core's availability-to-vacancy gap tightened to 260 bps, the smallest since mid-2019, and both Newmark and Colliers name The Hub at 30 Bay Street (1.4M sf proposed) as the candidate to launch on a major bank pre-lease.

Cap rates

CBRE's national survey has office yields compressing at the top while the quality gap sets records: national Downtown Class AA/A cap rates fell 7 bps to average 7.41% while Downtown Class B sat at 8.77% — a record 136 bps class spread (a national series; Toronto trades tighter than the average). GTA transaction evidence points the same direction but is thin and suburban-led: Avison Young counts $485M of Q1 office investment volume, up 262% from a year earlier, and CBRE reports roughly $180M of suburban office sales — nearly half of all 2025's suburban volume in one quarter — while downtown stayed frozen, with the $50.8M sale of 145 Wellington Street West one of just three downtown trades (Newmark).

REIT exposure

Public landlords remained net sellers into the quarter: H&R REIT sold 145 Wellington Street West (150,411 sf, Financial Core) to Crestpoint for $50.8M, or $338 psf. The exposure question the quarter poses is portfolio mix. Trophy- and Class A-weighted downtown owners sit in the segment that is tightening toward full — 72% of downtown inventory is Class A on Newmark's measure — while owners of commodity Class B/C hold the over one-quarter of downtown stock Newmark describes as distressed enough to need policy intervention (conversion incentives, zoning reform, tax relief) rather than a leasing cycle.