Cautious Optimism for Canada’s 2025 Commercial Real Estate Outlook

Avison Young has released its 2025 Mid-Year Outlook, providing a comprehensive analysis of Canada’s commercial real estate market. Drawing on insights from a national survey of industry professionals, the report examines trends across key sectors, including industrial, office, retail, and multi-residential, while highlighting regional dynamics in major urban markets. It explores how population growth, economic shifts, and evolving tenant expectations are shaping demand, investment strategies, and development activity. The latest report’s snapshot of current conditions and a forward-looking perspective on what to expect in the second half of 2025 indicated cautious optimism.

Industrial Sector: Navigating Tariff Challenges

The industrial market faces headwinds due to ongoing tariff negotiations, with some regions showing resilience while others face challenges due to rising construction costs and geopolitical uncertainties. However, some regions expect stability, influenced by local market dynamics. Despite these challenges, the sector remains a focal point for developers, particularly in logistics and special-purpose facilities. Rising construction costs and geopolitical uncertainties are prompting a more cautious approach to new developments.

Office Markets: Regional Variations and Strategic Leasing

Vancouver’s office market demonstrates resilience, with tenants committing to leases ahead of expirations, indicating long-term confidence. The city’s constrained supply and limited new developments contribute to a tightening inventory, especially in Class A and trophy assets. In contrast, Edmonton’s downtown core is experiencing growth, driven by an expanding education sector and increasing investor interest. Activity is driven by a mix of population growth and sector demand, while investor sentiment remains cautiously optimistic. Toronto’s market, while still uncertain, shows adaptability, with strategic players finding pathways forward.

Regional Overview

Vancouver

Vancouver’s office market remains resilient, with tenants signing leases ahead of expirations and constrained supply keeping inventory tight, especially for Class A and trophy assets. 

Edmonton

Edmonton is benefiting from strong population growth, driving demand for industrial and multi-residential properties, with investor activity influenced by market recalibration and caution in deal structuring. 

Calgary

Calgary’s industrial sector is rebounding, supported by infrastructure developments, while adaptive reuse is transforming office spaces. 

Ontario

Southwestern Ontario sees steady demand for industrial assets and measured recovery in office and retail, fueled by population growth and infrastructure improvements. In the Greater Toronto Area, office tenants are moving toward premium spaces, industrial demand remains strong, and retail is adapting to changing consumer behaviors. Ottawa remains stable, with stability supported by multiple sectors including government offices, retail, and multi-residential, as well as growing industrial interest.

Montréal

Montréal continues to evolve with flexible offices, strong industrial activity, and experiential retail growth.

Across all these markets, common trends include population growth, evolving tenant expectations, and selective investor activity. While each city faces its own challenges, the overall outlook for the second half of 2025 points to a resilient and strategically adaptive Canadian commercial real estate market, according to Avison Young.

Confidence Amidst Uncertainty

Looking ahead, the second half of 2025 is expected to bring more clarity and confidence to Canada’s commercial real estate market. Investors are becoming more selective but remain active, focusing on markets offering value and long-term growth potential. With advancing infrastructure projects, evolving policy environments, and demographic trends driving demand, the market is poised for a dynamic period of growth and adaptation.