Latest Commercial Real Estate Market Trends in Canada

Commercial real estate has undergone major changes in the last few years, and that will continue to be the case going forward. After a period of economic uncertainty, rising interest rates, and post-pandemic recovery efforts, there are new challenges and opportunities for investors, developers, and business owners. In this blog, we review the key commercial real estate market trends to watch for.

Market Overview: How Did We Get Here?

Working from home became the standard during the pandemic, leaving offices vacant and lessors scrambling to find new tenants. Prospective tenants began to demand upgraded spaces with amenities such as on-site gyms, smart technology, and premium security features. Although some older buildings were upgraded successfully, tenants were more interested in new builds that were designed to meet these expectations.

Interest rate hikes in 2022-2023 hit some commercial real estate sectors harder than others. Industrial real estate remained robust due to the need for e-commerce distribution centres, but new development of industrial spaces was slow. Office buildings and retail establishments suffered as higher interest rates combined with lower attendance discouraged new investment. Higher interest rates also made mortgages more expensive, leading to an increase in demand for rental properties and multi-family dwellings.

Interest rate cuts in 2024-2025 are expected to stimulate the market, but growth will continue to be inconsistent across sectors, and investors will need to do their due diligence.

Industrial Real Estate: Still a CRE Powerhouse

Industrial properties will continue to lead commercial real estate investment based on strong demand for warehouses and distribution centers for e-commerce companies. Key markets such as the Greater Toronto Area (GTA), Vancouver, Montreal, and Calgary will see the most growth due to their proximity to ports and other transportation infrastructure, as well as the availability of workers.

Large facilities will be supplemented by smaller, more strategically located warehouses to cut delivery times and costs. To overcome the prohibitive cost of land, multi-story warehouses will be sought-after commercial real estate.

To reduce staffing costs and improve efficiency, the trend will be toward facilities that are smart-system ready to facilitate the integration of automated storage and retrieval systems, state-of-the-art robotics, and features that optimize space utilization.

Office Space: Hybrid Work Force Adaptations

Although employers are still hoping employees will return to the office, that does not appear to be imminent. The ongoing shift towards flexible office solutions, co-working spaces, and remote work is causing tenants and investors to adapt.

Traditional office spaces continue to sit empty, while suburban buildings have become more attractive to workers who do not want to commute to downtown cores.

To meet tenant demands, commercial real estate owners are renovating and retrofitting older office buildings to include premium amenities, luxurious interiors, and eco-friendly features and to accommodate smart devices and systems. Because they can be designed with these preferences in mind, new builds continue to be more popular; this commercial real estate trend shows no signs of abating.

Retail Real Estate: Reinventing Brick-and-Mortar

Post-pandemic, shoppers were eager to get back to shopping in person. At the same time, expectations have changed, and this commercial real estate sector continues to adapt to consumer demands.

Landlords of large retail complexes eager to fill their vacant storefronts are also getting in on the office retrofitting action by creating multi-use complexes that make it easy to live, work, play, shop and socialize within a single development.

Vancouver’s Oakridge Park Project aims to illustrate the concept’s potential by converting an already top-performing retail shopping centre into a cultural hub that includes multiple live music venues, a food hall with global offerings, a community centre with athletic facilities, meeting space and youth services, a library, a daycare centre, community gardens, residential towers, office space, retailer space and a ten-acre public park – all powered by sustainable energy systems designed to create 70 per cent less greenhouse gas emissions than a comparable project.

Shoppers are less interested in big box stores, gravitating toward more experiential retail experiences that include interactive elements, entertainment, and more engagement with products. Retail locations with features like augmented reality, virtual reality, and smart mirrors are the biggest commercial real estate trends in the retail sector.

The integration of online and offline retail shopping (i.e. click-and-collect, show-rooming) has spurred the development of retail spaces that can accommodate these shopping experiences.

Multi-family & Mixed-Use Developments: A Resilient Asset Class

Housing affordability remains a challenge, especially in large urban centres. Because of this, demand for rental properties has increased. Investors have responded to this demand with urban developments close to transit hubs and by including multi-unit dwellings in their real estate investment trust (REIT) holdings.

In urban areas, housing density will continue to be a major commercial real estate trend. However, dense areas will be less popular if they do not have easy access to amenities such as grocery stores, gyms and public transit. Investors and developers should prioritize these neighbourhood features.

Sustainable & ESG-Focused Commercial Real Estate

The commercial real estate trend toward sustainability will accelerate. This pertains to both new developments and retrofits.

Green building certifications like LEED (Leadership in Energy and Environmental Design) and BOMA BEST (Building Environmental Standards) are playing a crucial role in driving property values, tenant demand, and investment appeal in Canada’s commercial real estate market. Investors should look for these certifications when deciding where to put their money.

Government incentives for green buildings will also play a role in driving sustainable development. The Government of Canada offers numerous incentives for new builds and retrofits in various sectors, including commercial real estate. There are also provincial and municipal programs for green initiatives across all commercial real estate sectors.

AI In Analytics and Financing

Artificial intelligence (AI) is revolutionizing commercial real estate by enhancing market analytics, investment decision-making, and financing strategies. With their ability to collect, organize, and synthesize enormous amounts of data, AI-powered tools help investors, lenders, and real estate professionals make faster and more accurate data-based decisions.

AI enables real estate professionals to analyze market trends, property valuations, and investment risks. Predictive models use AI to forecast property values, rental demand, and vacancy rates based on economic indicators, demographic shifts, and market conditions.

AI is also reshaping financing by streamlining underwriting, risk assessment, and loan approvals. Meanwhile, smart contracts are making property transactions more secure and transparent, reducing fraud and making the compliance process less burdensome.

On the tenant experience side, AI-powered chatbots, virtual assistants, and smart building technology make buildings more attractive and safer, while predictive maintenance tools assist property managers in keeping buildings working optimally. AI systems can also be used to adjust lighting, heating, and security features, cutting costs without affecting tenant comfort.

Wind and Solar Farms: Powering the Future

Renewable energy development, particularly wind and solar farms, is transforming rural landscapes and is set to become one of the biggest commercial real estate trends in the near future. Canada’s commitment to net-zero emissions by 2050 has accelerated investments in clean energy, creating new revenue streams for landowners.

• Wind farms require large, open areas with consistent wind patterns, often found in Alberta, Saskatchewan, and Ontario.
• Solar farms thrive in sun-rich regions and are increasingly integrated into agricultural lands where solar panels and crops coexist.

As sustainability initiatives expand, rural commercial real estate is poised for long-term growth, offering stable returns and government-backed incentives for investors and landowners. Expect to also see exciting joint projects between developers and farm owners.

Canada’s commercial real estate landscape is evolving, driven by shifting market demands, sustainability initiatives, and advancements in technology. From the continued strength of industrial properties and the reinvention of office spaces to the rise of experiential retail and rural investment opportunities, staying ahead in this dynamic market requires expert guidance and strategic decision-making.

Whether you’re looking to invest, develop, or lease commercial properties, having the right partner makes all the difference. RE/MAX’s team of experienced commercial real estate professionals is here to help you navigate the latest trends, identify lucrative opportunities, and make informed decisions. Contact RE/MAX today to explore how we can support your commercial real estate goals.