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As Canada enters 2026, its office and industrial real estate markets are showing signs of stabilization after a period of significant disruption due to the pandemic, shifts toward remote work, and global trade uncertainties. According to a recent report, the commercial real estate sector is adapting to changing business dynamics, with companies focusing on long-term space planning rather than reacting to short-term developments. The office market, especially in downtown areas, was hit hard during the pandemic when remote work became the norm. However, with many employers bringing workers back to the office, leasing activity is gradually recovering. While the market will not return to pre-pandemic levels, it is evolving with more intentional use of office space. Employers are placing greater emphasis on how space is utilized, prioritizing collaboration and enhancing the employee experience. Major employers across Canada, including key financial and corporate institutions, have implemented return-to-office policies, with most requiring employees to be in the office three to five days a week. This shift is expected to stabilize the office leasing market, particularly in urban centers. In 2026, most real estate professionals anticipate stable or modestly increased demand for office space, alongside a reduction in vacancy rates.
The industrial sector, which initially saw strong demand post-pandemic, is now facing headwinds due to ongoing trade disruptions, tariff pressures, and broader economic uncertainties. Manufacturing sales, a key driver for industrial real estate, have slowed, and as a result, demand for warehousing and distribution space has cooled. Despite these challenges, the industrial market remains relatively balanced, supported by the continued evolution of supply chains and a focus on creating efficient, modern industrial facilities. Experts predict that industrial space demand will increase in several regions in 2026, though growth may be tempered by the current economic climate and trade tensions. While some areas are experiencing a decline in demand due to external pressures, regions with diversified economies and robust logistics infrastructure are holding up better.
The pace of recovery in office and industrial markets varies significantly by region. Larger cities, such as the Greater Toronto Area, are seeing a strong rebound in office leasing, driven by the return-to-office trend. Meanwhile, other cities, like Vancouver and Calgary, have largely transitioned back to in-person work or continue to lag behind in this recovery. Similarly, the industrial market is experiencing divergent trends across different cities. Areas more heavily reliant on manufacturing and export-driven industries are grappling with the effects of trade disruptions, while regions with stronger logistics infrastructure and a focus on domestic markets are faring better.
Looking ahead to 2026, the commercial real estate market in Canada appears to be on a path toward greater stability, with businesses adopting a more strategic approach to space planning. While challenges remain, especially in the industrial sector, there is optimism for steady growth and a more predictable environment. The varying conditions across cities highlight the importance of understanding regional dynamics, economic drivers, and sector-specific trends when assessing market performance.