Canada’s Commercial Real Estate 

As Canada moves through 2025, its commercial real estate  sector is showing signs of cautious recovery. While the past year presented notable economic headwinds—including high interest rates, capital constraints, and shifting asset values—investors, developers, and policymakers alike are beginning to adjust to a market that looks significantly different than it did pre-2020. 

In many ways, the story of commercial real estate in Canada today is one of recalibration. From major city centers to secondary markets, stakeholders are balancing short-term pressures with long-term strategic moves that align with changing demographics, sustainability priorities, and evolving expectations about where and how Canadians live and work. 

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Investment Sentiment Slowly Shifts 
Following a prolonged period of uncertainty, investment activity in CRE is beginning to tick upward. The Bank of Canada’s interest rate cuts in late 2024 brought some relief to the borrowing environment, giving institutional investors and private capital alike a reason to reengage with the market. While overall deal volume remains lower than peak levels seen in past cycles, many in the industry describe the current moment as a transition phase—where buyers and sellers are finally beginning to find common ground on asset valuations. 

This shift is most apparent in the industrial and multi-family sectors, where demand remains resilient and fundamentals are strong. Industrial properties, particularly those tied to logistics and e-commerce infrastructure, continue to perform well. Meanwhile, the supply of purpose-built rental housing is nowhere near enough to meet demand, making multi-family one of the most attractive segments for both developers and investors. 

A Closer Look at What’s Working 
Amid ongoing volatility, certain asset classes are seeing renewed attention. Grocery-anchored retail, for example, has regained its footing after years of pessimism about brick-and-mortar shopping. In many communities, these properties are now viewed as stable, necessity-based investments, especially where land is scarce and redevelopment opportunities exist. 

Adaptive reuse is also having a moment. Across Canada, developers are finding creative ways to convert underutilized office buildings, strip malls, and other aging assets into residential rental housing, student accommodations, or mixed-use developments. This trend is particularly visible in cities like Calgary, Ottawa, and Halifax, where aging downtown infrastructure is being reimagined for new purposes. For many, these conversions represent a practical way to address Canada’s growing housing needs without the time and cost of ground-up construction. 

The Office Question 
No conversation about Canadian CRE is complete without addressing the office sector—perhaps the most complex and contentious part of the market. Hybrid work has become the norm for many companies, and the result has been a growing divergence between older, commodity office space and modern, high-quality buildings with strong ESG [Enviromental, Social, and Governance] credentials and tenant-focused amenities. 

While vacancy rates remain elevated in several major markets, there is also a growing recognition that office space isn’t disappearing—it’s evolving. Tenants are consolidating footprints and investing in spaces that support collaboration, employee wellness, and environmental performance. For landlords with aging inventory, the challenge is stark: invest in upgrades or prepare for significant obsolescence. 

Housing Pressures and Policy Levers 
Canada’s ongoing housing affordability crisis is also having ripple effects across the commercial real estate landscape. With home prices and rents remaining stubbornly high, there is sustained pressure on governments and developers to increase the supply of affordable and mid-market rental housing. Programs like the federal Housing Accelerator Fund have provided some support, but industry leaders continue to point to regulatory red tape and slow approvals as major barriers to progress. 

Interestingly, the boundaries between residential and commercial real estate are beginning to blur in certain contexts. Mixed-use developments, modular rental communities, and vertical integration strategies are all gaining ground as developers look for ways to deliver value in a constrained environment. 

Environmental Priorities and ESG Integration 
Sustainability and ESG factors are no longer optional in Canada’s CRE ecosystem. Institutional investors increasingly demand transparency and climate resilience, and major property owners are responding. From LEED-certified construction to retrofitting existing buildings with net-zero targets, ESG considerations are shaping asset decisions at every level. 

In urban markets, the demand for sustainable, energy-efficient buildings is becoming a clear differentiator. Properties that can demonstrate lower emissions, better tenant health outcomes, and long-term resilience are commanding greater attention—and, in some cases, higher lease rates. 

Caution Remains, But Innovation Persists 
Despite signs of recovery, challenges remain. Refinancing risk is top of mind for many, particularly as loans taken out during the low-interest era come due in a more expensive borrowing environment. Liquidity concerns are heightened among smaller players, and not all segments of the market are recovering at the same pace. 

Still, there is no shortage of innovation. Canadian real estate professionals are exploring new financial models, including tokenization and blockchain-based ownership platforms, that may open the door to greater access and transparency in the years ahead. These emerging tools are still in their early stages, but they reflect a growing appetite for new thinking in a traditionally conservative industry. 

Looking Ahead 
Canada’s commercial real estate sector in 2025 is a landscape in motion. The market is not what it was five years ago—nor will it be five years from now. With affordability, sustainability, and shifting demographics at the heart of nearly every conversation, today’s CRE leaders are making decisions that will shape the next chapter of Canadian cities and communities. 

Though capital may be cautious and risks remain, the industry is adapting. By investing in the right assets, embracing innovation, and working collaboratively to solve structural challenges, there is real potential for Canadian CRE to emerge from this cycle more resilient and more aligned with the country’s evolving needs.