The federal government is reversing a plan to reduce its real estate, with Public Services and Procurement Canada saying new return‑to‑office rules mean more office space is needed as executives begin spending more time onsite later this year.
Requirements call for work to be onsite five days a week starting May 4, while other employees are in their workspaces four days a week beginning July 6.
“Our analysis shows that the increase to a four‑day onsite presence for all employees will mean that certain departments will require more space in certain locations,” Public Services and Procurement Canada, or PSPC, spokesperson Michèle LaRose said in a statement emailed to CoStar News.
PSPC said it is working with departments and agencies to meet those needs by making better use of existing offices, renewing leases and, where necessary, acquiring additional office space. The department did not say where new space may be required or whether it would be leased or purchased.
The change of plans has major implications for one of Canada's largest office portfolios. PSPC manages roughly 65 million square feet of office space across Canada, supporting more than 300,000 federal public servants. More than half of that space is located in the National Capital Region, while the rest is spread across major cities and regional centres nationwide.
The Ottawa–Gatineau office market contains a total of about 103 million square feet of inventory, with a vacancy rate of 7.4% and roughly 7.6 million square feet empty, according to CoStar data. Net absorption has reached negative 1.5 million square feet in the past year, meaning more tenants moved out of space than moved into it.
Age of buildings matter
The market remains sharply divided based on property age, with vacancy near 5% in buildings completed since 2010, compared with close to 15% in larger, older properties, reinforcing a two‑tier market where demand concentrates in newer, higher‑quality space.
While PSPC is working to optimize underutilized space and renewing existing leases, the government will consider "acquiring additional space where requirements cannot be met within the existing portfolio. PSPC uses its operating budget to invest in maintenance, ensuring that buildings remain safe and suitable for employees as on site work requirements increase," LaRose said in the email.
The move runs counter to years of federal policy aimed at shrinking the government’s office holdings.
PSPC had said it set out to cut its office portfolio by up to 50% through hybrid work. The policy change follows criticism from the federal auditor general over the government’s failure to reduce its office footprint.
In a 2025 audit, Auditor General Karen Hogan said the federal government had cut its office space by just 2% since 2019, despite earlier findings that roughly half of its offices were underused. Public Services and Procurement Canada had estimated large reductions were possible, but the audit found slow progress and limited results.
Perhaps as a signal of what was to come, the federal government proceeded with office purchases in downtown Ottawa while the policy to shed properties was already in place. PSPC acquired office properties near Parliament Hill, including the office complex at 129‑131 Queen Street in a deal with Morguard. The federal government also made earlier buys at 181 Queen St. and the Chambers complex at Elgin Street during the time when it was aiming to shed real estate.
Other government bodies in Canada have maintained a variety of approaches to their real estate commitments. Quebec, for example, has a provincial government that requires most public servants to be in the office two days a week, a policy the province has linked to plans to sell off and consolidate much of its office real estate.