Canadian commercial real estate is entering a bifurcated recovery, where asset quality and structure are driving outcomes.
Office markets are beginning to stabilize at the top end, with Class A buildings seeing improved leasing activity and declining vacancy in key markets like Toronto. At the same time, legacy Class B and C office assets continue to face rising vacancy and structural demand challenges, reinforcing a widening performance gap.
In multifamily, purpose-built rental remains resilient, supported by high occupancy and steady rent growth. In contrast, the condo investor segment is under significant pressure, with sales at multi-decade lows and a growing overhang of unsold inventory.
While interest rate normalization is improving refinancing conditions, new construction has slowed sharply, setting up a potential supply shortfall later this decade. The current dislocation highlights a clear divide across Canadian CRE, where asset selection is increasingly determining outcomes.