Recent data shows Canada’s commercial real estate (CRE) market is performing better than broader sentiment suggests, says a new Avison Young report.

The comprehensive report covered major asset classes in the second quarter.

“Coming off the heels of tariff volatility at the start of the quarter, the commercial real estate market and broader economic indicators have shown a degree of resilience—especially when measured against the prevailing negative sentiment,” wrote Matthew McWatters, the report’s lead author.

McWatters is an Avison Young principal and managing director and leader of the firm’s Canadian valuation, advisory and property tax services practice.

Investors are navigating inflationary pressures and global tariff uncertainty, said the global advisory services company’s report.

The national economy appears to be holding up well, with GDP and employment figures exceeding forecasts, helping stabilize market activity in the second quarter.

Investors are showing a clear preference for high-quality and newer product, focusing on assets with strong fundamentals and long-term value. This trend is particularly evident across major urban centres where new developments continue to attract attention despite higher interest rates.

“Canadian markets, true to form, continue to offer steady results, solid liquidity and attractive conditions for a variety of investors,” said Amy Erixon, an Avison Young principal and head of the firm’s global investment-management business. “Increased political uncertainty is restraining development starts, which likely points to tightening future
conditions, rent increases and associated value increases into the near future. The best time to buy is when others are paused.”

The office sector remains a challenge, but there is growing recognition of opportunities within niche segments such as life sciences and purpose-built rental. Meanwhile, industrial and multi-family assets continue to demonstrate relative strength.

“Avison Young is encouraged with activity in the real estate investment sector,” said Mark Fieder, an Avison Young principal and head of the firm’s Canadian business. “There is strong demand for industrial, retail, and multi-residential assets. Not surprisingly, given we were anticipating a recovery, is
the rise in interest and transactions in suburban and downtown office buildings: A truly encouraging sign
for this asset class in cities across Canada.

“The bid-ask gap is closing, prompting investors to be open to office
opportunities. Supporting this is new occupier demand, a strong return-to-office movement, and mproving lease terms.”

Market leaders expect selective activity to persist, with well-capitalized players prepared to move as conditions evolve.