Despite lockdowns having faded into the past, many companies in Toronto continue to opt for hybrid work models, meaning an increasing number of nine-to-fivers are spending more time at local coffee shops and flexible workspaces instead of office spaces. 

As a result, a troubling report by the Star reveals that a portion of office tower owners in Toronto are "aggressively" trying to "off-load" their properties as high office vacancy rates remain. 

Real estate investment trusts (REITs) are companies that own, operate, or finance income-generating real estate, including office buildings. According to the report, REITs own about 15 per cent of the office space in Canada, although they have seen their market valuations fall dramatically. 

The city's high office vacancy rates mean that office tower owners are looking at all of their options — which could include conversions to residential buildings or full-out demolitions. 

Toronto's downtown is in serious trouble as office vacancies spiral out of control https://t.co/J804xqNJxf

— blogTO (@blogTO) April 10, 2024

Downtown Toronto saw a record office vacancy of 17.4 per cent in the fourth quarter of 2023, which increased slightly to 18 per cent during the first quarter of 2024. 

Commercial Real Estate Services (CRBE) Canada notes that this upward trend can be attributed to the introduction of some new office buildings, including the recently opened TD Terrace office tower at Simcoe and Front.

On top of the vacancy rates, REITs are also finding it challenging to off-load their properties due to a lack of potential buyers. For some companies, conversions may be deemed too pricey to execute, meaning total demolition may be more feasible. 

However, the report notes that the majority of premium office buildings in Toronto are owned by pension funds, which are generally not scrambling to off-load their properties. 

Still, longer-term projections for the downtown core paint a bleak picture, including a 2023 Atlus Group report that warned the city should expect an abundance of vacant office space until the 2040s.