The commercial real estate industry continues to face challenges across all sectors in Canada, although the impact varies by asset class. At the same time, emerging opportunities are contributing to cautious optimism among developers and investors as market conditions begin to stabilize.
A number of factors continue to shape the current landscape. Ongoing economic uncertainty and trade tensions remain headwinds, alongside government regulation, particularly restrictions on foreign investment in residential real estate, which were introduced to address supply constraints and affordability concerns. In addition, elevated government development charges and construction costs have impacted project viability, although construction costs are showing signs of stabilization. While immigration levels in Canada have been elevated over the past several years, many new arrivals are not immediately participating in the homebuyer market, tempering the near-term impact of population growth on residential demand.
Rebalancing has become the watchword for 2026. After several years of volatility, conditions are expected to stabilize in the coming months as sectors such as office and multifamily enter a correction phase, supporting a healthier rebalancing of supply and demand and more realistic asset valuations. Industrial real estate remains comparatively strong, having sustained demand throughout the COVID-19 period.
From a development and construction perspective, some sectors are expected to experience a slowdown. Industrial and commercial construction activity, in particular, is projected to decline as markets normalize. ConstructConnect predicts that commercial construction, including offices, transportation terminals, and parking garages, will contract by 46.6 per cent between 2025 and 2027, noting that this pullback reflects a normalization of activity and a return toward historical averages rather than a deterioration in underlying demand.
According to Colliers’ 2026 Global Investor Outlook Report, retail, self-storage, and industrial properties are showing resilience and, in some cases, outperforming expectations. Other strong growth areas include medical, educational, and community construction.
On the multifamily front, observers believe 2026 will see a stronger market over the next three to four years once unsold condominium inventory is cleared out. However, large-scale high-rise projects are expected to give way to smaller, more targeted projects that appeal to the changing needs of renters and buyers. Student housing, for example, is highlighted as a growing area.
An Urban Land Institute (ULI) report states that seniors’ housing is also gaining momentum as demographic shifts accelerate demand for new and innovative care models.
Interest on the part of investors is returning as global investors are increasingly looking to Canada as a safe, stable, and predictable haven in the face of economic uncertainty.
CBRE Canada chairman Paul Morassutti has stated that an uncertain global economy might work to Canada’s advantage in the year to come, and commercial real estate could be a chief beneficiary of renewed investor focus on this country.
Colliers notes that a growing number of European-based investors are renewing mandates to expand their presence in key markets such as Toronto, Vancouver, Montreal, and Calgary. Large domestic institutions, including major pension funds, are signalling plans to increase Canadian allocations. So far, tariffs have had a limited impact on demand, as a significant portion of trade remains tariff-free under existing agreements and strong domestic demand.
