Tech companies were supposed to be the ones abandoning the office. Instead, they became the ones redefining it. Now every other industry in downtown Toronto is racing to catch up.
Tech accounted for 32% of total office leasing activity in Canada in Q1 2026, up from just 15% in 2025 and more than doubling its share of the market in a single year. Toronto posted one of the largest percentage gains in tech leasing of any major North American tech hub during that stretch, alongside Manhattan and Boston.
That kind of swing is rare in commercial real estate, where demand usually shifts gradually as leases mature. A jump this sharp signals something more deliberate: tech firms are not waiting for renewal dates to act. They are moving now, while the best space is still available and before competition for it intensifies.
For a CFO or COO watching this from the sidelines, the question isn’t whether tech is back in the office. It’s why tech is moving first, what they’re buying, and what happens to pricing and availability once everyone else follows.
Downtown Toronto’s overall office vacancy rate fell to 13.4% in Q1 2026, down 120 basis points in a single quarter, on the back of 2.1 million square feet of net absorption–the largest quarterly absorption figure ever recorded in the market.
Trophy-tier vacancy, the segment tech tenants gravitate toward, has dropped below 10% for the first time since 2020.
This matters well beyond the tech sector. Class A vacancy (the tier just below trophy) has fallen 600 basis points over the past 12 months, meaning the gap between premium and mid-tier space is closing fast.
Tenants who would normally have settled for Class A space are now competing for it at trophy-level intensity, pushing pricing and incentive structures across the entire downtown core. Tenants who assume 2024-era vacancy and concession levels are still in play are negotiating from a position they no longer have.
Two years ago, a ‘winning’ office for most tenants meant a defensible lease rate and a reasonable location.
Today, tech tenants are setting a different bar: move-in-ready, amenity-dense, transit-adjacent space that functions as a recruiting tool, not just a workplace.
Landlords competing for tenants in this tier are retrofitting buildings to meet this standard, and that retrofit cost is increasingly being passed into asking rents and reduced concessions. Another reason the timing of a lease decision now carries real financial weight.
Financial services, insurance, and professional services firms, sectors that historically moved slowly on real estate, are now showing the same upgrade behaviour tech pioneered: consolidating into smaller but higher-quality footprints rather than renewing into the same square footage at the same spec.
That convergence of demand onto the same limited pool of top-tier space is precisely why downtown availability is tightening faster than headline vacancy numbers suggest.
There are currently only about 15 large contiguous blocks of premium space over 100,000 square feet remaining in the downtown core, and competition for them has intensified as the broader market tightens.
The development pipeline is making this worse, not better: with the recently completed CIBC Square II already fully pre-leased, only about 396,000 square feet of new office space is currently slated to deliver in downtown Toronto through 2030. There is effectively no meaningful new supply coming to relieve the squeeze.
For tenants who need scale, typically 20,000 square feet or more in a single, unbroken footprint, the available pool is now genuinely small, and it is shrinking with every deal that closes and every quarter that passes without new construction starts.
This is the detail most tenants don’t see until they’re already mid-search: the headline vacancy rate can look soft while the specific type of space a growing company actually needs is effectively gone.
With core supply this constrained, the next move for cost-conscious and growth-stage tenants is geographic.
Submarkets west of the downtown core, along with established suburban nodes, offer the contiguous block sizes, cost structure, and the runway for future growth that the core can no longer guarantee.
Tenants who get ahead of this shift are negotiating from a position of leverage instead of scarcity. Instead of competing for the same 15 blocks everyone else is chasing
Three things follow directly from this data:
None of this means tenants have lost leverage entirely. It means leverage has shifted to a different part of the market, and the tenants who recognize that shift early are the ones who negotiate well. Tenants who don’t will find themselves competing for what’s left, on the landlord’s terms.
Considering whether to renew or relocate? ENCOR Advisors represents tenants exclusively across Toronto’s office, industrial, and data centre markets. Talk to our team before you start your search.
Your questions answered
Tech firms are moving early to secure top-tier space before competition for it intensifies, rather than waiting until lease expiry. Tech accounted for 32% of total Canadian office leasing in Q1 2026, up from 15% in 2025, with Toronto posting one of the strongest gains of any major tech hub.
Downtown vacancy fell to 13.4% in Q1 2026 on record net absorption, and trophy-tier vacancy is now below 10% for the first time since 2020. Tenants who would normally consider Class A space are increasingly competing for it too, pushing pricing and reducing concessions across the broader downtown market.
Yes, but leverage depends heavily on space type and submarket. Tenants seeking large contiguous blocks face real scarcity downtown, while submarkets west of the core and established suburban nodes still offer negotiating room and stronger value.
Roughly 15 large contiguous blocks remain in the downtown core, a pool that continues to shrink as tech and financial services tenants compete for the same inventory.
ves flexibility to adjust footprint and configuration as your workforce plan changes.
Given the pace of change in top-tier supply, tenants should begin evaluating renewal versus relocation options at least 18 months ahead of lease expiry rather than waiting for the traditional 6 to 12 month window.
