Back to the Office? BMO's Four-Day Mandate and the Canadian Financial Sector's Real Estate Rebound

The Bank of Montreal's (BMO) recent announcement that employees in Toronto must return to the office four days a week by September 15, 2025, marks a pivotal moment for Canada's financial sector—and its real estate market. As one of Canada's “Big Five” banks, BMO's decision to prioritize in-person collaboration aligns with similar mandates from Royal Bank of Canada (RBC) and Bank of Nova Scotia (Scotiabank), signaling a sector-wide shift toward office-centric work models. For investors, this trend presents a critical opportunity to reassess commercial real estate valuations in urban centers like Toronto, where demand for prime office space could surge. But the path ahead is fraught with risks, from lingering remote-work preferences to economic headwinds. Here's how to navigate it.

The Catalyst: BMO's Four-Day Office Policy

BMO's policy, announced in late August / early September 2025, is part of a broader strategy to rebuild in-person collaboration, mentorship, and innovation—key drivers of client service and institutional culture. The mandate applies to employees in Toronto's core offices, including BMO Place and the Greater Toronto Area (GTA), where real estate capacity permits. While National Bank and CIBC have maintained flexibility, BMO's move underscores a growing consensus among Canada's largest banks that hybrid work models have limitations.

This shift is not merely symbolic. Workplace experts like Candy Ho note that the policy reflects a strategic bet on physical spaces to retain talent and competitive edge. “Banks are leveraging their decade-long investments in modern offices to signal that in-person interaction isn't just a relic—it's a productivity tool,” she said. For real estate investors, this means Toronto's office market, long plagued by post-pandemic vacancies, could see renewed demand.

How Office Policies Drive Real Estate Valuations

The financial sector's return to offices directly impacts commercial real estate in two ways: occupancy rates and asset valuation.

1. Occupancy Rates: BMO's policy—and similar mandates from peers—could stabilize occupancy in Toronto's financial hubs. A would likely show a dip post-pandemic, with recovery lagging behind pre-2020 levels. However, a sustained return to four-day office weeks could reverse this trend. For instance, RBC's 2023 return-to-office push correlated with a 5% uptick in downtown Toronto occupancy.

2. Valuations: Prime office assets in Toronto—particularly those near transit hubs or with modern amenities—could see premium pricing. A reveals that REITs with exposure to financial districts have underperformed broader market indices. A reversal in office demand could narrow this gap.

Investment Opportunities: Targeting the Financial Sector's Real Estate

For investors, the focus should be on REITs with strong portfolios in financial hubs and well-located office assets.

• REITs to Watch: RioCan REIT (REI.UN), which owns BMO Place and other Toronto landmarks, stands to benefit from the sector's return. Similarly, Cadillac Fairview, part of Brookfield Property Partners (BPO), holds key downtown properties. Both REITs have been consolidating assets in high-demand areas, but their valuations remain depressed due to lingering uncertainty.

• Smaller Players: Focused developers like Oxford Properties (a major player in Toronto's financial district) or Ivanhoé Cambridge (owner of the Scotia Tower) could see asset valuations rise as banks reinvest in their footprints.

Risks: Overcapacity, Resistance, and Economic Downturns

The road to recovery is not without potholes.

• Overcapacity: Post-pandemic office construction and remote work flexibility have left some markets oversupplied. A might show Toronto's vacancy rate hovering around 15%, higher than pre-pandemic levels. Banks' return could alleviate this, but overbuilding in suburban hubs (e.g., Mississauga) could dilute demand.

• Employee Resistance: Senior staff and tech-savvy employees may push back against mandatory office days, risking attrition. A could reveal lingering tensions.

• Economic Downturns: Should Canada's economy slip into recession, companies might delay office investments or revert to hybrid models.

Investment Strategy: Play the Trend, but Diversify

Investors bullish on the financial sector's return should:

1. Buy REITs with Prime Assets: Prioritize REITs like REI.UN and BPO, but pair them with broader real estate ETFs (e.g., iShares Canadian REIT Index Fund (XRE)) to mitigate sector-specific risks.

2. Avoid Overvalued Suburban Assets: Focus on urban cores where banks and financial firms are clustering. Avoid suburban office parks, which may struggle with overcapacity.

3. Hedge with Tech and ESG Plays: Pair real estate exposure with companies enabling hybrid work (e.g., video conferencing tools) or ESG-focused firms, as sustainability certifications could become a differentiator for office spaces.

Conclusion: A Gradual Rebound, Not a Boom

BMO's four-day mandate is a sign of shifting tides, not a guarantee of a full return to pre-pandemic office glory. Investors should proceed cautiously: while Toronto's financial district may see stabilization, broader recovery hinges on sustained demand from banks and other corporate tenants. For now, targeting well-located, ESG-compliant office assets in urban hubs offers the best risk-adjusted return. But with risks like overcapacity and economic headwinds lurking, diversification remains key.

In the end, BMO's policy is less a bellwether and more a bell—ringing a clear call to reassess how the financial sector values real estate in Canada's urban centers.