Global trade tensions and economic uncertainty are prompting a strategic shift in Canada’s commercial real estate (CRE) market, says Re/Max report issued Wednesday.

The company’s 2025 Commercial Real Estate report of first-quarter activity in 12 major markets found that investors are targeting assets with strong fundamentals, repositioning portfolios, and favouring adaptive reuse to weather ongoing challenges.

“It’s actually really location-based in terms of what the trend is,” Kingsley Ma, regional vice-president at Re/Max, said in an interview.

“It’s really hard for us to say Canada as a whole has a certain trend to it.”

Due to population growth, large cities are more active than other markets, he added.

Ma noted that investors and users have been pivoting since the period immediately following the COVID-19 pandemic right up to the present times.

Tariffs have not yet had a significant impact but they could, depending on how long the situation plays out, said Ma.

While activity has largely been location-based, all markets and all Canadians are affected by the uncertainty U.S. tariffs on Canadian imports.

“A lot of people are on the sidelines,” said Ma. “Even though people might have saved money for investments or to buy a home, they’re all on the sidelines, waiting for this to settle before make a purchase or investment of any sort.”

As a result, the pace of conventional commercial deals and residential-related investments will be slower until the dust settles.

“And even then, if this is all over, you still have to give a couple months for people to mentally settle in before they make large investments, either residential or commercial,” said Ma. “So, it does affect the entire population of Canadians.”

According to the report, multi-family and industrial assets led market performance in the first quarter, with retail close behind.

Multi-family outperformed other asset classes due to the high cost of housing, said Ma. Many people can not enter higher-priced markets. Many prospective buyers can’t afford to purchase single-family detached homes in several markets; as a result, investors and developers are buying small land assemblies and building multi-family developments to achieve better returns.

“It’s also better for consumers,” said Ma. “Now, there’s more supply for them to choose from, to move into areas where they originally thought they couldn’t because of the price.”

Multi-family and retail benefited from sustained population growth, e-commerce expansion, and government policies like the Housing Accelerator Fund, which is fast-tracking new housing development, states the report.

Ma said retail investors have pivoted due to demand for smaller store footprints amid the decline of department stores, and both landlords and investors to become more creative to determine what kinds spaces they want to rent out.

“Amazon changed the world,” he said referring to online purchases. “Amazon is now the department store but it’s digitalized.

“So, when it comes to retail, consumers want an experience when they go in the store. Certain retail stores have to provide a certain experience where they want to go in and feel the certain products and things like that.”

All retail outlets will probably adopt smaller footprints versus larger ones common in the past, he added. Ma predicts that larger shopping centre developments will contain more mixed-components, with a particular emphasis on multi-family.

In terms of specific markets, Western Canada and Newfoundland-Labrador saw the strongest commercial growth in 2025, driven by economic momentum, infrastructure investment, and interprovincial migration.

Institutional investors and REITs are cautiously re-entering the market, focusing on acquisitions that deliver long-term value amid rising construction costs and interest rates. Income-generating properties are now favoured over speculative land plays, especially in markets like Vancouver, where development has slowed due to high financing costs and a wave of distressed sales.

Industrial and multi-family sectors have both seen an increase in inventory, which has tempered rent growth and pushed vacancy rates higher in tight markets such as the GTA and Vancouver. Tenants are showing renewed interest in retrofitted properties as cost-effective alternatives to new builds.

The report also highlighted continued demand for senior and student housing, along with growing interest in converting offices and developing purpose-built rentals in major urban centres. Hotel investment is rising, too, with brands like Hilton, Marriott, and Hyatt planning expansions across Canada.

Overall, Re/Max says Canada’s CRE market is pivoting toward practical, fundamentals-driven strategies, positioning itself for renewed growth once economic clarity returns.

Photo: Re/Max