The Return of the Commute – Why the Commercial Real Estate Market is Suddenly Thawing

The same worn-out vocabulary has been used in discussions about commercial property for the past five years. Vacancy. Distress. written downs. Food courts that used to be bustling on Tuesdays with three vendors and a smoothie cart were half-lit at six o’clock in the evening. Without a spreadsheet, anyone who strolled through Toronto’s financial district or midtown Manhattan in 2022 could sense the atmosphere. No one appeared to be in a rush to fix whatever had broken.

However, a new sound has emerged in the past few months. Not exactly a boom. After a long winter, it’s more like the floorboards settling. With national office vacancy falling to 13.6% and industrial vacancy easing to 3.5%, Canada recently saw its first concurrent decline in office and industrial vacancy rates since 2020. Colliers’ Adam Jacobs described the change as “quite unprecedented” in terms of how quickly it happened, especially in Toronto, where the momentum for return-to-office has accelerated since the latter half of last year. On paper, this statistic doesn’t seem particularly striking, but if you’ve recently spent any time in a downtown elevator, it makes sense.

The American version, which is arguably more truthful, is messier. October 2025 ended a recovery that had been steadily increasing since early 2024, making it the first month of negative year-over-year transaction volume growth in almost two years. Kevin Fagan at Moody’s was cautious in his wording, portraying it less as a downturn and more as a standoff between buyers and sellers who are unable to move from their table. There is a component to that. Seldom is the bottom of a U-shaped recovery a single point. Everyone is waiting for someone else to flinch in this area of level ground.

Nevertheless, $24.4 billion was exchanged in the top fifty transactions in October. That represents about 70% of what October 2019 looked like, which may or may not be a reminder of how far the climb has come, depending on your personality. The New York Edition at 5 Madison Avenue, an old MetLife clock tower that briefly held the title of tallest building in the world more than a century ago, sold for $231.2 million. Hotels surprised on the upside, industrial and multifamily led. An Abu Dhabi-based sovereign wealth fund sold to a California-based developer. The value of money is rotating. It is more difficult to monitor confidence.

There isn’t a single factor causing the thaw, and anyone who presents you with a clear story is trying to sell you something else. A few buyers have been persuaded to come off the sidelines by the fact that interest rates have stopped rising without precisely falling. Three days in, two days out, with regional variation, hybrid work arrangements have become something of a steady state. High-end buildings are leasing once more. The unremarkable boxes from the 1990s with subpar lobbies and HVAC systems, known as the mid-tier stock, are still having problems and might continue to do so for years.

The Wall Street Journal reported earlier this year that investors who publicly wrote off the office sector in 2023 are quietly making a comeback on bidding lists. It’s actually difficult to tell if that’s conviction or a fear of missing the floor. We might be witnessing the beginning of a true recovery. Another possibility is that this is simply the gradual release of a market that overcorrected and is now regaining equilibrium.

For what it’s worth, the commute has returned. It wasn’t like that. But far enough back that a check can be written again by someone, somewhere.