Technology Tenants Fuel Demand in Toronto’s Commercial Real Estate Market
Venture capital firms spent $7 billion (U.S.) funding AI in Toronto tech companies from 2020 to the first quarter of 2026, contributing to a surge in office leases over the past year, according to a new report.
The findings are in the Tech Gateway Office Markets report released this week by CBRE, a Dallas-based Fortune 500 company and the world’s largest commercial real estate services and investment firm.
“Leasing activity, both by tech and non-tech (companies), has rapidly accelerated over the last year,” CBRE’s research managing director, Marc Meehan, said.
Across Canada, the tech industry increased its share of leased office space from 15 per cent in the first quarter of 2025 to 32 per cent one year later, the report said.
Toronto accounted for more than half of that 32 per cent, CBRE told the Star, adding that the beginning of 2026 marked the quarter with the most tech leasing activity since the start of 2020.
Still, the sector’s leasing activity is below pre-pandemic levels, when many U.S.-based companies were setting up offices in Canada, the report noted.
While Meehan said leasing activity seems to be headed back toward that pre-pandemic peak, another expert said the office market in Toronto is changing slowly, and it’s still under “stress” from the transformation that has taken place over the past six to seven years.
“That stress comes from the reduction in the need for office (space) that is across almost all sectors,” said Peter Norman, principal of Norman Economic Strategies.
Even though some 200,000 office jobs have been created in the GTA over the past two years, he said, it’s not creating a “boom” in office use; jobs are being accommodated in “high density spaces” as employers rely less on supplies like paper and filing cabinets because they can work electronically, and many have moved to hybrid work.
Across the GTA, there’s still about 4.5 million fewer square feet being occupied than there was in 2019, he said, adding that the remaining space is either vacant or has already been removed from the market.
“We’re still way below water in terms of the amount of space which is leased up,” Norman said.
Additionally, he said, the rate of growth is still “really week” compared to before the pandemic.
While the GTA was seeing office leases growing at a rate of about two million to 4.5 million square feet per year, that rate is now down to about 500,000 square feet per year, at most, he said.
Meehan, for his part, explained that the increase in office leasing in Toronto has been largely due to return-to-office mandates among banks, but tech growth has also played a role.
For instance, Google, Nvidia, Samsung, Adobe, LG and Unilever have all established foreign AI research labs in the city, he said.
However, he noted that even Toronto-based AI “success stories” aren’t necessarily making large impacts on the office market. For example, Cohere has raised some $1.6 billion (U.S.) in venture capital funding, but it occupies only about 7,300 square feet in the downtown core, he said.
“In the scale of our office market, it will help (increase leasing activity), but it may not move the needle as much as wider trends like return-to-office, or the decrease in the construction pipeline,” Meehan said.
Following some companies’ short-term decisions to move to remote work over the past five years, the firms are revisiting their office strategies and “quickly leasing space in the declining amount of Class A, trophy-office inventory,” he said.
The report also noted that while the tech industry is expected to continue creating jobs in Canada, the U.S. and Europe — particularly for workers specialized in AI — the shift to AI has simultaneously led to many job losses.
“The costs required to build AI infrastructure and develop models and tools have created a capital crunch and put an emphasis on reducing operating expenses,” the report said. “As a result, many tech companies are repositioning their workforces and capital expenditures toward AI development and deployment that has resulted in a growing number of job cuts.”
According to Oxford Economics, the report noted, tech industry job growth has “slowed considerably over the past several years,” but it is expected to continue growing in 2026.
Growth is projected at below two per cent in Canada and less than one per cent in the U.S. and Europe.
Norman, however, highlighted that these figures don’t account for all the non-tech jobs, and office jobs in particular, that AI is poised to replace.
“That’s the flip side of this,” he said.
This article was first reported by The Star
