Toronto’s office investment market still faces significant headwinds, with sales volumes plummeting to $1.05 billion in the first 11 months of 2025 from $4.28 billion in 2022, the lowest since the pandemic’s onset. But investor sentiment toward office space is gradually improving.

Optimism is concentrated in downtown core assets and has been driven primarily by leasing trends rather than deals. An important reason for the shift is the growing traction of return-to-office mandates, particularly among major banks and government offices, which are now back in the workplace four to five days per week.

This renewed occupancy is strengthening demand and fueling confidence that the office investment market in Toronto may be approaching a turning point, with early signs of renewed activity beginning to emerge.

In recent weeks, the largest office deal of the year closed in Toronto when KingSett Capital sold 70 York Street to Desjardins Global Asset Management for $134.6 million. This transaction provides much-needed clarity on pricing and could pave the way for more building sales among major institutions.

Institutional ownership dominates Toronto’s prime office segment. Until now, these players have been hesitant to sell as transacting at current values risks setting benchmarks that could undermine portfolio valuations. As a result, liquidity has remained thin, and investment sales have lagged behind improved leasing activity.

Government entities have played an outsized role in supporting the market, accounting for roughly 17% of sales volume so far this year, primarily through acquisitions for their own use. The Ministry of Infrastructure’s purchase of 438 University Avenue for $105.6 million was the largest deal prior to the sale of 70 York Street last week, highlighting how public-sector activity has sustained momentum while private institutions have stayed on the sidelines.

With returning investor confidence and pricing becoming more transparent, we may be shifting from a market driven by government buyers to one where liquidity improves and institutional trading resumes. Leasing fundamentals are already moving from negative to positive, and as office property values begin to reflect this trend, investment activity should follow.

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