Interest rate stability is drawing sidelined capital back to income-producing properties across Canadian markets
Canada’s commercial real estate market is showing renewed momentum as investors return to high-quality, income-generating assets amid stabilizing borrowing costs and improving property fundamentals.
According to RE/MAX Canada’s 2026 Commercial Real Estate Report, released today (May 12), investment activity has picked up across major markets as leasing strengthens, retail remains resilient and industrial demand holds firm despite broader geopolitical and economic uncertainty.
The report, which examined first-quarter activity in 12 major Canadian markets, found that office leasing has improved, particularly in top-tier buildings as return-to-office mandates support demand for premium space.
At the same time, investors are focusing on properties with dependable cash flow and long-term income potential.
“While uncertainty shaped much of 2025, we’re now seeing a clear shift in investor behaviour,” says Damon Conrad, Vice President, RE/MAX Canada Commercial. “Capital remains cautious and focused on preservation, but as financial conditions stabilize, deferred demand is beginning to re-emerge. Investors are highly selective, but they are increasingly prepared to act where income stability and long-term value are evident.”
The report suggests that a lengthy period of price discovery may be easing. With borrowing costs stabilizing and sellers and buyers narrowing expectations, early signs of cap rate compression are emerging in selected sectors, helping to unlock transactions.
Major centres
Investors are targeting major centres such as the Greater Toronto Area, Vancouver and Edmonton, where improving conditions are drawing capital back into the market. Prairie provinces and Atlantic Canada continue to stand out, supported by stronger fundamentals and comparatively attractive opportunities.
Office demand has become increasingly polarized. Premium, amenity-rich buildings in cities including Toronto, Vancouver and Ottawa are attracting tenants, while aging downtown properties in Calgary, Winnipeg and London face mounting pressure to reposition or convert to other uses.
Suburban office markets are outperforming in many regions as tenants place greater emphasis on affordability, accessibility and employee safety.
Retail remains one of the strongest-performing segments. Grocery-anchored shopping centres and neighbourhood retail properties are experiencing low vacancy and strong investor demand in markets such as Calgary, Regina, London, Hamilton and Halifax. Limited supply is intensifying competition for available properties.
Industrial real estate continues to serve as a key driver of market activity. Demand for small-bay and flexible industrial properties remains robust, particularly in Edmonton, Saskatoon, Regina, Winnipeg, London and Ottawa, where supply is constrained. In Vancouver and Hamilton-Niagara, new supply has created more balanced market conditions.
AI influence
The report also points to growing investment in logistics and data infrastructure, with Calgary benefiting from increased activity in those sectors and Hamilton-Niagara beginning to attract interest related to AI-driven development.
In the multi-family segment, rental demand remains supported by strong population growth, although higher vacancy rates have emerged in some markets following a wave of new completions. Financing challenges and construction costs continue to weigh on new development, but recent policy changes to reduce development charges in Toronto and density reforms in Vancouver are helping improve project economics.
“Investors are no longer approaching the market broadly,” says Conrad. “Capital is being deployed with far greater precision, targeting assets with clear income profiles and long-term resilience. Quality, location and tenant stability are driving decision making with less emphasis on speculation and greater focus on durable cash flow.”
Conrad said that as financing conditions continue to improve, transaction activity is expected to build.
“Investors are only prepared to sit on the sidelines for so long,” he says. “As financing conditions ease and pricing expectations align, capital is re-entering the market with greater conviction. Transaction activity is beginning to build, and while recovery remains uneven, momentum is clearly shifting toward a more active and disciplined investment environment.”
