Canada Commercial Real Estate Market Size & Share Analysis - Growth Trends & Forecasts (2025 - 2030)

Canada Commercial Real Estate Market Trends and Insights

Surge in near-shoring-fueled industrial demand along the Ontario–Quebec corridor

Manufacturers moving production closer to North American consumers are absorbing warehouse and flex assets across the Windsor-Quebec City stretch, encouraged by Quebec’s USD 4.05 billion competitiveness plan that counters U.S. trade barriers.^{[1]“Discours sur le budget 2025-2026,” finances.gouv.qc.cammigration,” canada.ca} Industrial leasing remains brisk in automotive and advanced-manufacturing clusters, even though national exports fell 2.8% in Q3 2024. Enhanced CN rail capacity, underpinned by a USD 356 million upgrade, lifts throughput and reduces transit times, strengthening the corridor’s logistics profile. Developers are adding modern, high-clear-height facilities, yet construction pipelines stay disciplined amid cost inflation, preventing oversupply. Medium-term absorption is set to dominate new completions as distribution operators prioritize speed-to-market advantages.

Federal immigration targets adding 500 k residents annually boosting multi-family construction

Policy makers aim to admit 395 000 permanent residents in 2025, tapering to 365 000 by 2027, with 29% of arrivals holding construction trades skills.^{[2]Statistics Canada, “Building Construction Price Indexes, Q1 2025,” statcan.gc.ca} The influx intensifies demand for neighborhood retail, life-cycle office services, and urban logistics nodes in Toronto, Vancouver, and Montreal. Stable household formation supports mixed-use projects near transit, narrowing the housing supply gap by an expected 670 000 units by 2027. Secondary cities such as Halifax and Saskatoon are also attracting newcomers, broadening the geographic footprint of commercial developments. Developers are leveraging modular designs that can pivot between residential and ground-floor commercial use to future-proof projects.

Toronto tech-tenant expansion sustaining Class-A office pre-leasing despite hybrid work

Technology employers continue to prioritise collaborative hubs, evidenced by Kainos tripling Toronto headcount to 300 by 2025. Large pre-lease deals are queued for delivery through 2026 even as the citywide vacancy sits at 19.2%. Tenants prefer amenity-rich towers that support employee wellness and ESG credentials, leading to a bifurcated market in which Grade-A space outperforms commodity offices. Co-working operators are also scaling footprints, absorbing backfill space from occupiers rightsizing portfolios. Short-term incentives, such as turnkey build-outs and rent abatements, remain prevalent but are expected to taper once vacancy plateaus.

E-commerce penetration crossing 8% of retail sales driving last-mile urban logistics

Retailers upgrading omnichannel capabilities are leasing micro-fulfillment centers within 10 km of dense consumer clusters, decreasing delivery times and lowering emissions. The International Transport Forum highlights sidewalk delivery robots as a promising solution for congestion alleviation, nudging zoning authorities to permit smaller logistics footprints in mixed-use areas. Adaptive reuse of older retail boxes into cross-docks is common, especially around Toronto and Vancouver. Developers are factoring in higher power loads and data connectivity to accommodate automation. Medium-term demand for sub-150 k sq ft facilities is forecast to outstrip supply, keeping rents on an upward trajectory.

Elevated Bank of Canada policy rate keeping cap rates sticky and valuations volatile

Although the policy rate eased to 3% in 2025, mortgage spreads continue to shadow bond yields, sustaining a bid-ask gap that muffles transaction velocity. Cap-rate decompression is most visible in secondary office and retail, while prime industrial remains tighter. Smaller sponsors relying on bank credit are retreating, allowing well-capitalized REITs to consolidate positions. Forward hedging costs keep development starts subdued until financing markets stabilise further. Short-term, price discovery hinges on additional rate cuts and clarity around U.S. tariff policies.

Construction-cost inflation averaging 11% CAGR pressuring development margins

Statistics Canada recorded a 3.5% year-over-year cost rise for non-residential builds in Q1 2025, with local spikes in London and Regina. ^{[3]Government of Canada, “Government of Canada Reduces IMinistère des Finances du Québec,} Material volatility, notably for steel and aluminum, complicates tender pricing and squeezes fixed-price contracts. Developers of affordable housing and mixed-use projects struggle to pass costs to tenants, forcing redesigns or phased delivery. Prefabrication and bulk-buy procurement are mitigating some pressures but require scale that smaller builders lack. Supply-chain hiccups in mechanical equipment elongate project timelines, adding carry costs and contingency premiums.

Segment Analysis

By Property Type: Offices anchor activity while logistics accelerates

Offices accounted for 34% of the Canada commercial real estate market in 2024, reinforcing their role as the sector’s primary revenue driver. Vacancy peaked at 18.4% nationwide yet stabilized as tenants traded up to modern space, compressing obsolescence risk in newer towers. Investment flowed into experiential upgrades—wellness centers, flexible collaboration zones, and renewable-powered HVAC—to retain knowledge-sector occupiers. The flight-to-quality dynamic, coupled with limited new-build starts, underpins rental resilience in Class-A assets across Toronto, Vancouver, and Montreal. Meanwhile, provincial incentives for office-to-residential conversion removed 870 000 sq ft from stock in Q1 2024, tightening prime supply and supporting rent growth in downtown nodes.

Logistics is the fastest-growing category, expanding at a 5.1% CAGR through 2030 as retailers target same-day fulfilment standards. Multi-level urban warehouses and cold-chain facilities attract institutional capital keen to capture steady cash flows. Developers emphasize power redundancy, dock-door ratios, and turnaround lanes compatible with electric delivery fleets. Despite elevated land prices near Toronto’s Pearson Airport, demand consistently outruns supply, maintaining rent premiums and low structural vacancy. Investors employing cross-docking retrofits and mezzanine build-outs are boosting returns without large green-field risk. Collectively, offices and logistics together represent more than half of the Canada commercial real estate market size, signalling balanced exposure between legacy and growth-oriented assets.

Note: Segment shares of all individual regions available upon report purchase

By Business Model: Sales turnover dominates, but rentals lead growth

Sales transactions constituted 62.7% of the Canada commercial real estate market in 2024, reflecting capital-recycling strategies among REITs and pension funds. Mega-deals, such as Artis REIT’s USD 729.7 million divestment program, illustrate active portfolio rebalancing that supports liquidity in core markets. Foreign investors, notably from Singapore and Germany, are net buyers of stabilized retail and industrial assets, leveraging favorable currency differentials. Title transfers have clustered around Toronto and Vancouver, where data transparency accelerates underwriting. Nonetheless, bid-ask alignment remains fragile when debt pricing is volatile.

The rental model, growing at 4.98% CAGR, is becoming central to institutional strategies prioritizing income durability during economic uncertainty. CAPREIT’s 98.1% occupancy and USD 117.3 million same-property NOI in 2024 spotlight rental resilience s25.q4cdn.com. Asset managers are deploying smart-building systems to optimize landlord-controlled utilities, lifting net operating income without elevating face rents. ESG compliance frameworks also unlock green financing advantages, lowering interest costs on refinances. As debt markets stabilise, analysts expect rental portfolios to command valuation premiums relative to trading-oriented platforms, cementing their share of the Canada commercial real estate market size over the forecast horizon.

By End-User: Corporates and SMEs shape demand patterns

Corporates and SMEs commanded 73.1% of the Canada commercial real estate market in 2024 and are forecast to expand at a 4.84% CAGR, buoyed by technology-sector hiring and on-shoring manufacturing. Employers seek high-density, transit-rich office precincts to access talent and foster collaboration. The segment’s growth also fuels requirements for regional distribution hubs that support omnichannel retail strategies. SMEs in life sciences, fintech, and creative industries gravitate toward flexible leases within innovation districts, creating opportunities for landlords offering plug-and-play space.

Demand from individuals and households centers on neighborhood-scale retail and mixed-use assets that integrate grocery anchors with community services. Government and institutional users, while smaller, supply steady revenue streams through long-duration leases, particularly in defense, education, and healthcare facilities. Corporates’ shift toward hybrid work has increased interest in adaptable floor plates and wellness-certified air filtration systems, pushing landlords to retrofit stock quickly. Immigration-driven labor growth adds further depth to occupier pipelines, ensuring that corporates and SMEs remain the dominant influencers of Canada commercial real estate market share over the medium term.

Note: Segment shares of all individual regions available upon report purchase

Geography Analysis

Ontario held 29.1% of the Canada commercial real estate market in 2024, anchored by the Greater Toronto Area’s dense agglomeration of financial, technology, and life-science tenants. Electricity demand in the province is projected to climb 60% by 2050, underpinning infrastructure investment that boosts commercial construction. The Ministry of Economic Development earmarked USD 1.85 billion for 2025-2026 to court advanced-manufacturing projects, while the Transit-Oriented Communities initiative incentivizes mixed-use nodes around new subway stations. Vulnerability to U.S. trade policy persists, as three-quarters of provincial exports cross the American border, but near-shoring trends partly offset that risk by encouraging local production.

Quebec, the fastest-growing province at a 5.1% CAGR, leverages USD 4.05 billion in economic programs and abundant hydro power to court data-center and aerospace investors. Investissement Québec logged USD 6.5 billion in foreign direct investment across 82 projects in 2024-2025, signalling diversified demand beyond traditional manufacturing. CN’s USD 356 million rail upgrade and the REM light-rail project propel logistics capabilities and catalyze USD 9 billion in contiguous real estate development. Broader export strategies targeting Europe and Asia reduce dependence on U.S. markets, softening cyclical shocks.

British Columbia and Alberta offer counter-cyclical positioning, with Calgary’s recovery anchored by energy diversification and professional-services growth. The Canada Infrastructure Bank pipeline exceeding USD 25 billion in public-private projects across Western provinces enlarges the industrial and office footprints of second-tier cities. Atlantic Canada benefits from spillover logistics demand and a growing near-shoring footprint in food processing and clean-tech components. Across regions, specialization—whether in clean energy, AI infrastructure, or advanced manufacturing—dictates capital allocation strategies, widening the canvas for investors pursuing balanced exposure within the Canada commercial real estate market.