Flight to Quality Continues Across Canada’s Office Sector
CoStar Group forecasts Canada's office vacancy rate to decline to 8.7% by 2028, with higher-end assets outperforming. Vacancy peaked at 10.4% in Q2 2025, falling to 9.8% in Q2 2026. Rent growth for premium assets is expected to reach 4%, compared to 2% for others. The decline is driven by limited new construction, not increased demand. CoStar Group (NASDAQ: CSGP) is a global leader in commercial real estate data and analytics.
How this was made
The 30-second read
Why it matters
The new numbers suggest a more optimistic outlook for high‑end office assets, which could benefit data‑service providers and REITs with premium portfolios, while lower‑grade assets may face continued pressure.
Market read
First‑hand forecast data that may shift valuations for office‑focused REITs and data‑service stocks.
What to watch
Potential impact of rising interest rates on office financing and the risk of a slower economic recovery in Canada.
Background
CoStar Group, a leading commercial‑real‑estate data provider, issued an updated outlook for Canadian office vacancy and rent growth, noting a thin construction pipeline as the primary driver.
Ticker impact
CoStar Group released a new forecast showing Canadian office vacancy rates declining to 9.3% in 2027 and 8.7% in 2028, better than prior expectations.
Potential modest upside for CSGP and office‑focused REITs; downside risk for landlords of lower‑grade assets.
The forecast is a primary disclosure from CoStar, a key data source; market participants may adjust valuations of office‑sector exposures based on the revised vacancy trajectory.
Market effects
Highlights a bifurcated office market in Canada, favoring higher‑end assets and pressuring lower‑grade landlords and related REITs.
May influence Canadian office‑sector equities and REITs, as well as U.S. investors tracking cross‑border real‑estate exposure.
Provides data for global investors assessing office‑space recovery trends post‑pandemic.
Counterpoint
The forecast may underestimate a potential rebound in demand if fiscal stimulus or remote‑work policies shift, keeping vacancy higher than projected.
Key entities
- CompanyCoStar Group
Provider of commercial real‑estate data and analytics (NASDAQ: CSGP).
- SectorCanadian office market
Commercial office real‑estate sector in Canada.
