Canada’s Real Estate Market: Investor Interest Grows Despite Weak Economy

Canada’s property market continues to uphold its reputation as a reliable destination for long-term capital, even amid concerns about economic weakness. According to Colliers, investors are attracted by a combination of limited supply and favourable valuations across key segments — from rental housing and retail to industrial assets. These fundamentals are creating a foundation for expanding development activity and increased investment in 2026.

Market Conditions

Market conditions in Canada are gradually improving, although concerns related to tariffs persist. Uncertainty surrounding relations with the United States — the country’s largest trading partner — continues to influence sentiment. However, new tariffs have not yet exerted significant pressure on demand. Most trade still operates under existing frameworks, while business activity is supported by domestic consumption.

As interest rates normalize, the cost of capital is falling, pricing expectations are becoming more realistic and the gap between buyers and sellers is narrowing. Colliers notes that these factors are paving the way for a rise in transaction volumes in 2026.

Reed Taylor, Head of Capital Markets Canada, highlights that lenders remain willing to finance quality projects. Capital-raising activity is gradually recovering: following a slowdown in 2025, a large portion of capital remains undeployed, while pressure to place funds is intensifying — conditions that should support the market in the coming year.

Demographics and Development

Demographic and regulatory factors are among the Canadian market’s strongest advantages. The country continues to experience high population growth, and stricter migration policies have not yet altered the general trend — Canada is expanding faster than most advanced economies. This supports stable demand for housing and related asset classes.

Construction volumes remain constrained: the market is significantly underbuilt compared to the United States, widening the supply-demand gap in both the rental and retail sectors. Colliers forecasts that development activity may begin to recover by late 2026, supported by more accessible capital, greater lender flexibility and faster project approvals. Experts note that development challenges, paradoxically, benefit investors: the market is not overcrowded with new supply, and many segments still offer a “clean slate” with limited competition.

International and Domestic Capital

Canada is strengthening its position in the global investment landscape. Alongside active US and Asia-Pacific investors, interest from European funds is rising, particularly in Toronto, Vancouver, Montreal and Calgary. Asset prices remain competitive internationally.

Large Canadian institutions — relatively inactive for nearly three years — are returning to the market. Pension funds are signaling plans to increase allocations to domestic assets, from direct investments to platform-level deals. After years of prioritizing long-term strategies, landlords are reassessing portfolios in favour of instruments with shorter income horizons.

Asset valuation clarity is improving: the gap between bid and ask prices is narrowing, and values are converging toward realistic levels. This is fostering conditions for a broader return of domestic players in 2026 and improving liquidity. Colliers also anticipates more privatizations, joint ventures and recapitalizations. Real estate funds continue to trade below NAV, opening opportunities for strategic transactions. JV partnerships and flexible financing structures are gaining traction as investors adapt to more complex deal frameworks.

Real Estate Sectors

Retail remains a key target for institutional investors. Grocery-anchored assets and everyday-needs retail are in particularly high demand. Rising rental rates and stable return expectations continue to support strong buyer interest. Limited supply in major metro areas is making secondary markets increasingly attractive. Supermarkets, neighbourhood shopping centres and large-format power centres remain top picks.

Industrial and logistics are adjusting after a period of significant new supply. While concerns about cross-border trade persist, fundamentals remain solid. Absorption slowed in 2025 but continues to meet strong North American benchmarks. Investor interest is rising in small- and mid-bay warehouses as well as last-mile urban facilities.

Large distribution centres experienced the sharpest corrections, but the steep decline in speculative construction is creating the conditions for market tightening by 2027–2028. Vacancy has risen from historically low levels of 2–3%, yet remains under 1% in key submarkets — a rarity even among advanced economies. Colliers expects the sector to remain stable in 2026 without major fluctuations.

Purpose-built rental housing continues to show strong momentum. Investment volumes grew by more than 20% in 2025, and Colliers expects this trend to continue. Supply shortages are especially evident in Toronto, Calgary and Ottawa. Despite stricter migration rules, immigration flows remain near historic highs, sustaining rental demand.



Offices are entering a recovery phase. The expansion of return-to-office practices and efforts by companies to reclaim space after pandemic-era reductions are supporting demand. Toronto is seeing growing requirements for high-quality downtown offices, while increased activity in Vancouver and Montreal is strengthening investor confidence. Limited supply in central business districts is boosting demand for premium assets and, subsequently, for well-located suburban offices.

Alternative assets are gaining significant traction. Investors are focusing on segments tied to demographic trends: student housing, senior living and self-storage facilities. Student housing demand is supported by high international mobility and limited on-campus accommodation. Data centres are also attracting interest, although energy-infrastructure constraints limit rapid expansion. Large portfolio transactions are becoming increasingly common, with institutions entering asset classes they avoided five to ten years ago.

Key Factors to Watch in 2026

Colliers highlights several dynamics to monitor next year. High yields and growth potential remain strongest in retail and industrial sectors outside the largest metros. Institutionally driven demand for student housing and hospitality projects is opening opportunities for new partnerships. Large-scale infrastructure programs are creating favourable conditions for domestic development.

Risks include tariff uncertainty and trade tensions, which could weaken business sentiment and reduce lender appetite. A slow labour market and moderated immigration growth may cool the rental housing segment. Congested transport infrastructure continues to hinder the recovery of core office markets.