Entering 2026, commercial real estate (CRE) across Canada and the United States (U.S.) is no longer defined by the rapid repricing that characterized the past several years. Instead, the market is shifting into a more deliberate recalibration.

Pricing is firmer, capital is re-engaging selectively and fundamentals—rather than forecasts—are increasingly shaping investment decisions.

This is not a return to the low-rate environment of the past decade. Early signals point to 2026 as the year the market begins to operate within a new, more rational baseline, particularly in Canada.

A subdued 2025 marked by selective activity and stabilizing fundamentals

2025 transaction volumes in the U.S. improved modestly from 2024 lows, according to MSCI Real Capital Analytics, though they remained well below long-term averages as investors waited for clearer pricing signals. While CBRE’s outlook for Canadian CRE anticipates a strengthening recovery in 2026, transaction volumes in 2025 did not broadly improve year-over-year (YoY); rather, they contracted by 12.0% overall across Canada by Q3 2025, with significant variations by asset class and region. Oxford Economics characterizes the Canadian economic outlook in 2025 as one of subdued growth, higher unemployment and slower population inflows.

In the U.S., consumer resilience supported demand across several sectors; by the second half of 2025, MSCI data showed modest YoY value growth in retail and industrial assets, while office fundamentals continued to lag.

Traditional lenders remained highly selective across both markets. Private and non-bank lenders continued to play an important role in refinancing and recapitalization activity—a trend noted consistently in CBRE’s Canadian and U.S. Real Estate Lenders’ Reports.

Housing pressures continue to shape CRE fundamentals

Housing remains one of the most influential forces underpinning CRE performance heading into 2026. Structural undersupply persists in both countries, even as elevated borrowing costs and sluggish demand temper near-term price appreciation.

In Canada, resale prices are expected to stabilize through 2026 following modest declines in 2025. Affordability remains constrained in major metropolitan regions and slower condominium pre-sales have restricted new development pipelines, reinforcing demand for purpose-built rental. Clearer guidance and consistent policymaking remain important for supporting market confidence.

In the U.S., the multi-family sector is moving through the peak of its supply cycle. New deliveries are expected to recede steadily through 2026, allowing vacancy rates to stabilize and rent growth to normalize, with potential compression of capitalization (cap) rates in certain markets.

Across both markets, these dynamics continue to support residential-adjacent defensive segments. Asset classes such as multi-family and grocery-anchored retail attracted stronger debt and investor interest. At the same time, lenders remain selective and more conservative in underwriting, applying higher minimum hurdles and more conservative assumptions around rent growth and vacancies.

A market defined by divergence, not uniform recovery

Sector performance remains uneven across both Canada and the U.S.

In Canada, industrial continues to demonstrate resilience, supported by long-term demand for logistics and distribution space. CBRE data points to moderating new supply pipelines and low vacancy across major logistics hubs, helping sustain cash flows even as rent growth eases.

In the U.S., industrial fundamentals show a similar pattern, although markets that saw large waves of new deliveries over the past two years are now experiencing more balanced conditions.

Retail has re-emerged as one of the steadier property types in both countries, supported by limited new construction, healthier retailer balance sheets and durable performance from grocery-anchored formats. CBRE reports that U.S. retail vacancy is now the lowest among major property types, a notable shift from pre-pandemic perceptions of the sector. In Canada, CBRE observes that food and grocery tenants continue to play a central role in retail investment decisions, given their ability to drive consistent foot traffic and align with consumers’ growing emphasis on convenience and accessibility.

Multi-family rental performance continues to diverge across North America. While Canada remains a tighter market, the wave of new deliveries has finally had its intended effect, moderating rental rate growth and pushing national vacancy rates up from 2.2% to 3.1%, according to Canada Mortgage and Housing Corporation (CMHC). In the U.S., several high-growth metros are working through a wave of new deliveries, leading to more competitive leasing conditions and, in some areas, increased use of tenant incentives as new projects lease up. By contrast, larger, supply-constrained urban markets have largely stabilized, with construction pipelines remaining more limited. Across both countries, rising operating costs—from insurance to utilities—continue to place pressure on margins, underscoring the need for operational efficiency and attainable rent profiles.

Office remains the most fragmented segment. CBRE research continues to highlight high vacancy rates in older, commodity buildings for many downtown cores. At the same time, demand for well-located, amenity-rich space has proven more durable. 

Refinancing, restructuring and selective opportunity

Loan maturities will continue to shape market activity heading into 2026. A meaningful share of mortgages originated in the low-rate era of the late 2010s are now rolling over at higher costs of capital. In its fall 2025 Commercial Real Estate Debt Universe report, Trepp estimates U.S. banks alone have roughly US$598 billion of CRE loans maturing by the end of 2026, indicating a substantial refinancing horizon for 2025–26, while Canadian borrowers face similar renewal pressures within a more conservative lending framework.

Entering 2026: clarity before acceleration

The defining feature of 2026 may not be a sharp uptick in deal flow, but a clearer operating framework. After several years of abrupt rate movements, central banks appear closer to the end of their easing cycles. While interest rates remain materially higher than pre-2022 levels, reduced policy volatility has improved visibility for both borrowers and lenders.

That clarity is beginning to show up in pricing. CBRE reports that bid-ask spreads narrowed through late 2025 in sectors with the strongest fundamentals—particularly industrial, multi-family and grocery-anchored retail—as buyer and seller expectations began to converge.

Preqin notes a significant pool of private real estate capital remains undeployed. Rather than waiting for further rate cuts, many investors are reassessing opportunities that can perform under today’s borrowing costs.

The result is a shift away from timing the next inflection point and toward structuring investments to operate effectively in a more normalized environment.

A more grounded path forward

Across the industry, capital is being allocated with far more scrutiny than in prior cycles. Rather than relying on broad market appreciation, investors are evaluating opportunities through a narrower lens: the strength of local fundamentals, clarity of policy, the reliability of income streams in a higher-cost environment, paired with project viability. Momentum is emerging first in sectors and jurisdictions where these conditions are most predictable.

If 2024 marked the beginning of repricing and 2025 represented the search for stability, 2026 is shaping up to be the year the sector establishes a more durable footing.