By Allen Mayer, Commercial Real Estate Broker | RE/MAX Ultimate Realty Inc.
Navigating Toronto’s transformed office market since pre-pandemic times
Why Old Strategies Are Costing Tenants Thousands
The Toronto office leasing market I am working in today bears almost no resemblance to the market I worked in seven years ago. Landlords who once had waiting lists now call me asking if I have tenants. Buildings that commanded $42 per square foot in 2019 are negotiating $34 per square foot today — and throwing in six months of free rent to close deals.
If you are approaching office space leasing in Toronto with pre-pandemic assumptions, you are leaving enormous value on the table. The power dynamic has shifted dramatically, and tenants who understand this are signing deals that would have been unthinkable five years ago.
This is what the current Toronto office space leasing market actually looks like — and how to use it to your advantage.
The Office Market Nobody Talks About: Availability vs. Vacancy
The Numbers Everyone Sees
Toronto’s official office vacancy rate in early 2026 sits around 15-17% in the downtown core, depending on which report you read. That is what gets reported in commercial real estate publications.
The Numbers Nobody Reports
The availability rate — which includes space that is currently leased but being actively marketed for sublease — is closer to 22-25% in many Class A buildings downtown.
I toured a building on Bay Street last month where 7 of the 18 floors had sublease space available. The landlord’s own direct vacancy was only 2 floors. The headline vacancy rate for that building: 11%. The real availability: 39%.
Why this matters: Sublease space is almost always cheaper than direct lease space, and sublandlords are often more desperate to deal than building owners. But sublease availability does not show up in most market reports.
What Changed (And What That Means for Your Negotiation)
2019: Landlords Had All the Leverage
Before the pandemic, I negotiated office leases where landlords would not move on rent, would not offer free rent, and required five-year minimum terms with personal guarantees.
A client wanted 3,000 square feet in a King West building in 2018. The landlord’s offer: $46 per square foot, gross. No free rent. Five-year term. Take it or leave it. We took it because there were three other tenants waiting.
2026: Tenants Have Leverage They Don’t Know They Have
Last month I negotiated 2,800 square feet in a comparable King West building for a different client. The landlord’s first offer: $38 per square foot net, with six months free rent, $35/sf tenant improvement allowance, and flexible termination after year three.
We countered at $34 per square foot with nine months free and a $40/sf TI allowance.
They accepted.
The difference: In 2019, landlords had options. In 2026, they have vacancies.
The Free Rent You’re Not Asking For (But Should Be)
How Free Rent Actually Works
Free rent is not a discount. It is a timing tool. You still pay the same total rent over your lease term — you just start paying later.
Example:
- 5-year lease at $40/sf for 2,000 sf = $400,000 total rent
- With 6 months free rent, you pay $400,000 over 54 months instead of 60 months
- Your effective monthly rent is slightly higher, but your upfront cash outlay is dramatically lower
Why Landlords Prefer Giving Free Rent Over Lowering Base Rent
Landlords hate lowering their stated base rent because it affects their building’s valuation. A building with leases at $40/sf is worth more than a building with leases at $36/sf, even if the effective rent (after free rent concessions) is identical.
This creates an opportunity for tenants. Landlords will often give substantial free rent periods while keeping the base rent higher on paper.
What You Should Be Asking For in 2026
For Class A office space in Toronto right now, these free rent periods are reasonable and achievable:
- 3-year lease: 4-6 months free rent
- 5-year lease: 6-9 months free rent
- 7-year lease: 9-12 months free rent
- 10-year lease: 12-18 months free rent
I closed a 10-year deal in North York in January 2026 where the tenant got 16 months free rent plus a $50/sf tenant improvement allowance. The landlord was thrilled because they locked in a decade-long occupancy and could report a $42/sf lease rate to their lender.
If your broker is not negotiating for free rent in the current market, you need a different broker.
The Sublease Market Is Where the Real Deals Are
Why Sublease Space Exists
A company signed a 7-year lease in 2021 for 8,000 square feet expecting to grow to 60 employees. They are now at 35 employees with a hybrid work model. They need 4,000 square feet but are paying for 8,000.
They are desperate to sublease the other 4,000 square feet. They are paying $44 per square foot to the landlord. They will sublease it to you for $36 per square foot just to reduce their losses.
The Sublease Advantage
Sublease deals often come with:
- Rent below market rate (sublandlord is trying to minimize their loss, not maximize profit)
- Existing build-out (furniture, meeting rooms, kitchens already in place)
- Shorter commitment (sublease term = remaining term on the master lease)
- Faster occupancy (no tenant improvement construction delays)
I had a client who needed 3,500 square feet of office space in Mississauga with a move-in deadline of 6 weeks. Direct lease space would have required 4-5 months of tenant improvements.
We found a sublease with a fully built-out space, existing furniture, and a motivated sublandlord. The client moved in 12 days after signing and paid 22% below market rate.
The Sublease Risk You Need to Manage
Critical clause: Your sublease agreement must include a “Non-Disturbance Agreement” from the landlord.
If the master tenant (your sublandlord) defaults on their lease to the building owner, the building owner can terminate your sublease even if you are current on rent. A non-disturbance agreement prevents this.
Many sublandlords will not want to request this from their landlord because it signals financial distress. Push for it anyway. If they refuse, walk.
Read More : Challenges of Subleasing Office Space
The Tenant Improvement Allowance Has Tripled (If You Know How to Ask)
2019 Standard: $20-$25 per Square Foot
Before the pandemic, tenant improvement allowances for office space averaged $20-$25/sf for a 5-year lease. Tenants who asked for more were often refused.
2026 Reality: $35-$55 per Square Foot
I am closing deals today with $45-$55 per square foot TI allowances for Class A office space on 5-7 year terms. Landlords would rather contribute to your build-out than have the space sit vacant.
Why the shift: Vacant space generates zero revenue and still incurs operating costs. An occupied space — even with a massive TI allowance — starts generating rent.
How to Maximize Your TI Allowance
- Get three contractor quotes and present them to the landlord with your TI request
- Show specific scope of work (demolition, electrical, HVAC, finishes)
- Tie TI allowance to lease term (offer a longer term in exchange for higher allowance)
- Negotiate a TI allowance per square foot, not a lump sum (gives you flexibility to use it across the space)
A lump sum TI allowance of $100,000 sounds generous, but if your space is 3,000 square feet, that is only $33/sf. Negotiate for $45/sf and get $135,000 instead.
The Flexibility Clause That Protects You From the Next Disruption
What Nobody Learned From the Pandemic
Most businesses that struggled with office leases during COVID signed long-term leases with no exit options. When their space needs changed, they were trapped.
I had clients in 2020-2021 who were paying for 6,000 square feet they could not use and could not sublease (because the market was flooded). They still owed 3-4 years on their leases.
The Contraction/Expansion Clause
A contraction clause allows you to reduce your leased square footage at defined intervals (usually annually) by giving 6-9 months notice.
An expansion clause gives you the right of first refusal on adjacent space in the building if it becomes available.
Both should be in your lease.
Example clause language I negotiate:
- Contraction right: Tenant may reduce leased space by up to 25% at the end of year 3, with 9 months written notice, provided tenant is not in default
- Expansion right: Tenant has right of first refusal on any space on the same floor or directly above/below that becomes available
Landlords will resist these clauses because they create uncertainty. Counter by offering a longer initial term or a slightly higher base rent in exchange for the flexibility.
The Biggest Mistake Tenants Are Making Right Now
Signing Deals Too Quickly Because They Think the Market Will Tighten
I have had three clients in the past six months tell me: “We should sign now before rates go back up.”
The market is not tightening. Office demand in Toronto remains structurally below pre-pandemic levels. Hybrid work is permanent. Companies are not expanding their office footprints.
Landlords know this. Brokers representing landlords are creating artificial urgency to get tenants to sign before they realize how much leverage they have.
If a broker tells you “another tenant is looking at this space, you need to decide now,” ask for proof. Most of the time, there is no other tenant.
Work With a Broker Who Represents Tenants, Not Landlords
Every landlord has professional representation. Most tenants negotiate alone or with a broker who is actually getting paid by the landlord.
I represent tenants exclusively in lease negotiations. My job is to get you the lowest rent, the best terms, and the maximum concessions. I have done this for 25 years across hundreds of deals.
View available office space across Toronto and the GTA or contact me to discuss your office space requirements.
Related Resources:
- 5 Costly Commercial Real Estate Mistakes Toronto Business Owners Make
- Return-to-Office 2026: Why Toronto Businesses Are Rushing to Lease Office Space Now
- Commercial Properties for Lease in Toronto
About the Author:
Allen Mayer is a licensed commercial real estate broker with RE/MAX Ultimate Realty Inc. and a member in good standing with RECO, TRREB, and CREA. He has negotiated office leases across Toronto and the GTA for over twenty-five years, representing both landlords and tenants.