GUEST SUBMISSION: As we navigate 2026, Canada's commercial real estate market has demonstrated remarkable resilience in the face of economic uncertainty.

While tariff tensions have undoubtedly slowed momentum overall and some geographies have been disproportionately impacted, market performance generally exceeded expectations.   

Here are main findings to explore in JLL’s 2026 Canadian Commercial Real Estate Outlook: 

Economic foundation remains strong

The Canadian economy showed its characteristic stability throughout 2025, avoiding a technical recession despite the implementation of aggressive U.S. tariffs that reached their highest levels in a century.

With U.S. trade accounting for nearly half of nominal Canadian GDP, the uncertainty surrounding trade policy created a temporary holding pattern for business investment and exports. However, lower interest rates kept domestic demand buoyant, and crucially, 90 per cent of exports to the U.S. continued to flow tariff-free under CUSMA terms.

This resilience has been particularly evident in provinces tied to extractive industries. Alberta and Saskatchewan continued to outperform, benefiting from ongoing population growth and strong demand for energy and agricultural goods.

Meanwhile, provinces with higher exposure to steel, aluminum, and automotive tariffs – primarily Southwestern Ontario and Montréal – faced greater challenges but remained stable.

Property sectors show divergent recovery patterns

Industrial: After three years of rising vacancy, the industrial sector reached an inflection point in Q4 2025, with vacancy plateauing at 5.2 per cent nationally. Net absorption improved dramatically to just under nine million square feet, up from 2.3 million in 2024.

This turnaround was driven by strong leasing activity in the second half of the year, particularly in Toronto and Calgary, with third-party logistics providers leading demand as companies sought expertise in navigating supply chain disruptions.

Office: The office sector delivered its strongest performance since 2018, with gross leasing activity surpassing 28 million square feet.

This helped push down the national availability rate for five consecutive quarters, falling from in early 2024 18.1 per cent to 16.6 per cent. This momentum reflects a clear consensus that in-person connections remain essential for company culture and productivity, with our latest research showing 51 per cent of workers now in the office 3-5 days per week – a post-pandemic high.

Retail: Despite posting its first negative absorption in over a decade, the retail sector showed underlying strength. Investment sales increased 10 per cent year-over-year to $6.6 billion, with retail spending up 4.5 per cent nationally through November.

Because Canadian developers are very conservative when it comes to where and when to build new retail, supply remains somewhat constrained. As a result, retail vacancy remains contained within the two- to three-per-cent range.

Multifamily: This sector experienced the most dramatic shifts, with 2025 marking the first year in which purpose-built rental construction exceeded both condominiums and single-family homes.

CMHC data shows 114,456 newly completed rental units – more than double the previous decade's average. This supply surge pushed national apartment vacancy from 1.5 per cent in 2023 to 3.1 per cent in 2025, giving renters more options and negotiating power.

Multifamily investment sales were up 2.2 per cent versus 2024, fuelled by a surge in multifamily investment transactions in Alberta, Southwestern Ontario and Montréal. 

Capital markets signal growing confidence

Investment volumes totaled $46.2 billion in 2025, representing a five per cent decline from 2024 but showing clear momentum in the final quarters.

Most significantly, institutional investors returned in force, deploying nearly $15 billion – equivalent to about one-third of the overall market and their largest share since 2021. This institutional re-engagement underscores growing confidence that Canada has entered a new capital cycle characterized by stronger fundamentals and improving returns.

The return of "patient capital" was particularly evident in sectors where leasing fundamentals improved, including office, retail, seniors housing, and data centres. Office investment sales reached $5.1 billion, up 15 per cent year-over-year, with over 40 per cent of activity concentrated in Vancouver.   

Regional dynamics reflect affordability migration

Population growth patterns continue to favor affordability.

While on a national level population growth is essentially flat, we are still seeing significant demographic momentum in cities that demonstrate a relatively low price-to-gross-income (PGI) ratio. This includes places Moncton (4.3 per cent annual population growth), Regina (3.3 per cent), Edmonton (3.2 per cent), Calgary (2.9 per cent) and Halifax (2.7 per cent).

These cities should continue to see strong demand fundamentals especially in the multifamily, retail and industrial sectors. 

Looking ahead with cautious optimism

As we move through 2026, several factors support cautious optimism: 

• Leasing activity defied predictions, particularly in the second half of 2025. This is a reminder that business goes on even if there are macroeconomic and demographic headwinds.
• Construction pipelines are cooling across the office, industrial and retail sectors, which should ease material and labour costs while creating demand pressures that drive rental growth.
• Purpose-built rental development continues at record levels, supported by various government incentives. After years of debate, there now appears to be much more alignment between the public and private sectors that Canada’s housing affordability challenge can only be addressed through sufficient levels of new supply. Governments on a local, provincial and federal levels are contemplating ways to reduce permit timelines and fees for developers, which was unthinkable a few years ago.
• Cost of capital is stabilizing – albeit at higher levels than we have seen in some time. This is providing a higher degree of predictability to investors and should – along with improving rental growth – give investors the conviction needed to deploy more capital in 2026.

Canada's commercial real estate fundamentals remain among the strongest globally, supported by a stable financial system, high-performing major metros and continued investor confidence. While challenges persist – particularly around trade policy uncertainty and slower population growth – the market has demonstrated its ability to adapt and find solutions.

As we focus on what we can control rather than external noise, the foundation is set for continued resilience and selective opportunity in the year ahead.