Head of research, Adam Jacobs, tells WP why the outlook is looking better
Canada is emerging as a stronger investment destination than the United States across key real estate and economic fundamentals, according to a new report.
It highlights Canada’s resilience in the commercial real estate (CRE) sector with office vacancy rates in major Canadian cities remaining lower than in US metros, even after a significant development boom.
Employers, particularly in finance and government, are also pressing ahead with return-to-office mandates, bolstering urban demand.
Colliers’ 2025 report Why Invest in Canada? highlights that while US growth is supported by heavy deficit spending, Canada’s federal debt-to-GDP ratio remains far lower, giving it long-term flexibility.
Looking at the office market, which has been disrupted by the pandemic and work-from-home preferences, Adam Jacobs, head of research at Colliers Canada, told Wealth Professional that the Canadian market is emerging from tough times.
“Although it’s been a painful five years for the office market, the outlook is actually much worse in the US, even in leading markets like Seattle and SF,” he says. “Development tends to be more and faster in the US than Canada, which can lead to an overbuilt market; much less common here.”
Borrowing costs are also more favorable north of the border, with 10-year bond yields below 3.5% compared to persistently higher US levels, with the historically low gap now exceeding one full percentage point.
“Real estate is more dependent on debt and borrowing than almost any other asset class,” explains Jacobs. “A 1% difference in interest rates is a huge difference and makes financing/refinancing and development easier.”
Does that mean that capital is set to flow into Canadian CRE?
“So far it has been a very slow year for foreign investment in Canada, but that can largely be attributed to the unprecedented trade war and tariff uncertainty,” says Jacobs. “On the reverse side, Canadian funds continue to be the second largest cross-border buyers globally after only the US and ahead of much larger countries such as Japan, India and Germany. While rates are not the only explanation for this, it certainly doesn’t hurt.”
The report notes that Canada’s real estate market is not oversupplied like the US, where per-capita office and retail space is far higher.
Meanwhile, Canada’s population surge, driven by record immigration, has fueled demand for housing, retail, and logistics space. Although immigration has recently cooled, forecasts expect Canada to regain a demographic edge by 2027.
“Retail has come back in vogue after being out of favour pre-pandemic,” Jacobs notes. “The predicted takeover of ecommerce has not happened in many areas (grocery, pharmacy, alcohol) and retail has become a popular ‘defensive’ investment during the trade war. Retail is less built out than in the US, so owners of retail face less threat of competition or obsolete assets than in markets with more development.”
Canada’s smaller, institutionally dominated investment market has proven less volatile than the US, the report notes, avoiding the sharp downturns seen south of the border.
Returns reflect this stability with Canada seeing consistent gains in the MSCI Commercial Property Price Index, outperforming all G7 nations and several major global markets despite higher interest rates and inflation.
“The property price index is a composite and Canada industrial real estate (warehouses, logistics, fulfillment centres) has been one of the best performing in the world over the past half decade,” concludes Jacobs. “Rents have quadrupled in some markets, and it has counter-balanced some weakness in other areas of commercial real estate.”
