'Investors are reassessing': Canada's commercial real estate market is beating out the U.S., says report

  8/26/2025 |   SHARE
Posted in Commercial Real Estate by Vanguard Realty | Back to Main Blog Page

Commercial real estate in Canada currently offers better investment opportunities than the United States and other global markets, a new Colliers report argues, citing stronger population growth, a more favourable lending environment and tighter supply conditions.

“Normally, when the world looks scary, money runs to the U.S. — but right now, they’re creating some of the chaos themselves,” Adam Jacobs, Colliers’ head of research, said in an interview with Yahoo Finance Canada.

The Colliers report is partly aimed at foreign investors who might default to the U.S. when looking for a foothold in North America. But Jacobs says one factor in particular deserves more attention — Canada’s population growth, which has consistently outpaced other developed economies.

Citing Oxford Economics data, the report notes Canada’s population grew at twice the U.S. rate in 2022 and nearly triple the rate in 2023 and 2024. Although immigration has slowed this year, Colliers expects Canada to regain its demographic edge by 2027. Jacobs acknowledges growth is politically sensitive, but says Canada is “not as polarized” and most inflows are economic.

“Population growth kind of drives everything in the real estate world — apartments, retail spending, the labour market,” he said. “It doesn’t solve every problem, but it’s a tailwind for everything.”

Jacobs points to office and retail in particular, where growth in population and spending support long-term demand. For retail investors, that dynamic is most visible in Canadian REITs tied to those sectors, where occupancy and rent growth often reflect the demographic backdrop.

Canada vs. the U.S.

For decades, the U.S. has been the ultimate safe haven during periods of global instability. Jacobs argues today’s environment is different. Although Canada can’t match the U.S. in size or liquidity, he says the perception of American stability has shifted. “Perhaps the U.S. isn’t quite as stable or predictable as we thought it was,” he said.

“It’s a moment where investors are reassessing.”

One of the sharpest areas of divergence between the two markets is interest rates. Canadian 10-year bond yields sit more than a point below U.S. levels — a rare break in the usual pattern. For a debt-sensitive industry like real estate, that gap is critical.

“One per cent may not seem like much, but given the leverage people are dealing with in real estate, one per cent is a massive difference,” Jacobs said.

That spread has created a more accommodating environment for Canadian development and refinancing, though Jacobs acknowledges bottlenecks such as municipal approvals still weigh on new projects.

Supply dynamics also favour Canada. While major urban centres may feel perpetually under construction, the market is far less saturated than in the U.S. The report says the U.S. has 16.5 square feet of office space per capita compared to Canada's 12.6, and 23.5 square feet of retail space to Canada's 16.8. Jacobs says this scarcity protects assets from being undercut by new developments, a common issue in the U.S.

“If you own an existing asset here, it may be more valuable long term, just because you’re not facing all that competition of more and more assets in the market competing against you,” Jacobs said.

CBRE’s Retail Rent Survey for the end of 2024 found vacancy rates at historic lows and rental growth holding steady despite economic headwinds, suggesting that demand outstrips development pipelines.

The long-term case
Even outside demographics, Jacobs points to resilience in Canada’s office sector. Vacancy rates have climbed, but downtowns remain healthier than many of their American counterparts hollowed out by remote work.

“It feels very apocalyptic here… but we still have some of the strongest office markets in downtown in the world,” he said.

Jacobs also argues Canada’s market is less prone to dramatic swings than its southern neighbour. Slower development and the dominance of pension funds mean fewer fire sales and a steadier market.

That stability has translated into superior returns. Colliers notes Canada’s commercial property price index has remained mostly positive since 2022, even as U.S. values declined. Over the past five years, Canada has outperformed every other G7 nation, along with markets such as Singapore and Hong Kong.

Finally, “more favourable” federal finances in Canada add another layer of resilience. While U.S. growth has leaned heavily on deficit spending, Canada’s debt-to-GDP ratio remains lower, offering more policy flexibility.

“It’s not often presented this way, but there’s a real case for Canada as the steadier option,” Jacobs said.

Source: Yahoo Finance

Canadian Commercial Real Estate Markets, Commercial Real Estate Investments