Here's why some executives are bullish on Canada's commercial real estate outlook in 2026

  1/16/2026 |   SHARE
Posted in Commercial Real Estate by Vanguard Realty | Back to Main Blog Page

After a bumpy few years for Canada’s commercial real estate market, experts in the space are seeing cautious cause for optimism in 2026 and some signs that a better year could be ahead.

Avison Young’s latest national cap rate report, released on Thursday, highlighted opportunities emerging across a range of asset classes including office, industrial, retail, and multi-residential, with brokers surveyed indicating an increasingly positive outlook.

Sixty-four percent (64%) of brokers surveyed expect higher activity this year, the company said, a big jump from 45% in mid-2025 – and Avison Young Canada president Mark Fieder  talked Canadian Mortgage Professional through some of the reasons he’s seeing good signs for the coming 12 months.

Prominent among those is a better outlook for the office market, which has struggled since the pandemic to shake off the effect of lingering hybrid and remote work arrangements.

But major companies, especially in downtown Toronto, have been ramping up their return-to-office efforts – and Fieder sees that trend continuing in 2026. “We haven’t seen absorption levels like this for six years,” he said.

“So that’s improving leasing fundamentals in favour of landlords, which in turn is improving people’s outlook on office so that now we’re seeing that there are buyers.”

The industrial market also appears to be strengthening after a year of adjustment in 2025, when it saw a correction following a surge in rental rates during the previous four years.

That meant activity cooled slightly last year, particularly in the warehouse space. But Avison Young underlined emerging investment opportunities along infrastructure corridors and data centre and AI investment growth, as well as manufacturing tax breaks, as reasons for a better outlook in 2026.

“Our practitioners across the country are of the firm belief that by mid-2026 we’re going to see a return to increasing rental rates,” Fieder said, “because demand is picking up and supply has been whittled away.”

Prospects look strong for retail lending in 2026

The retail sector, meanwhile, is a surprisingly bright spot for the commercial market, Fieder said, even despite a significant recent decline in department stores as big names either shut their doors or face closures.

The sector’s bullishness, he added, is partly because owners are finding inventive new ways to fill the void left by those closures. “There are many shopping centre owners that are looking for new opportunity and have really interesting plans to backfill some of the vacancy that came from department stores,” he said.

“But overall, retail is doing very well. I think in Canada, we’ve been fortunate in that a lot of our retailers – in addition to having physical space – also implemented very robust online marketing solutions for their businesses as well. The two working together has been pretty powerful and they’re seeing the benefits from that today.”

Data centres: The next big thing in commercial real estate?

A prominent talking point in the commercial sector over the past two years has been the rise of data centres, part of a wider boom spurred by the skyrocketing popularity of AI and cloud computing.

Those are often huge facilities housing IT infrastructure such as storage, servers, and networking gear to process and distribute data for businesses.

They’re certainly a trend to watch, Fieder said, although he cautioned against assuming a data centre surge will take the market by storm this year.

“I think in the US, it’s quite possible they could end up with a major oversupply of data centres due to overbuilding – but here in Canada, it seems to be disciplined,” he said. “Data centres are not just bricks and mortar. It’s a business. It’s all the equipment that goes inside and there are some critical components to it: access to big pipes, your ability to transfer data, and power supply.

“It’s something to watch… [but] it’s not as big an alternative investment as people think. Student housing, storage, and a few other spaces – they’re actually a lot bigger than data centres.”

Source: Canadian Mortgage Professional

Commercial Market Trends, Commercial Real Estate, Commercial Real Estate Investments