This commentary is the third in a series of articles in our Special Report on Real Estate in Canada and around the world.
Quick question: What’s the biggest opportunity for Canadian commercial real estate right now?
Short answer: Donald Trump.
In fact, threats and turmoil from the U.S. President over trade and tariffs are making this an unusually good time for investors looking at commercial real estate opportunities in Canada rather than south of the border.
“The U.S. is often the default place for investors looking at North American real estate, but there are tailwinds in Canada right now,” says Adam Jacobs, head of research at Colliers Canada.
He points to a new report by Colliers Canada, released in late August, which found that there are “favourable investment conditions in Canada relative to the U.S.”
Ordinarily, the U.S. is considered a safe haven by institutional and high-net-worth investors such as family offices. But right now the office sector in major Canadian cities is “more optimistic” than in comparable U.S. cities, the report says. “Vacancy rates remain significantly lower [in Canada], even after a development boom in the early 2020s that added tens of millions of office square footage to major markets,” it notes.
Toronto, Montreal and Vancouver office vacancy rates in the first quarter of 2025 were all below 20 per cent, compared with vacancies consistently higher in Chicago, Los Angeles, Dallas, Atlanta, Washington, Houston and San Francisco, Colliers says. (According to CBRE, the office vacancy rate was 18.1 per cent in downtown Toronto, but the office market is stable and office leasing activity is strong.)
“These comparisons are with major U.S. cities, not Rust Belt areas in decline,” Jacobs said in an interview. “People became alarmed at office vacancy rates in Canada, but overall it’s a pretty favourable picture.”
Beyond the Trump factor
The barrage of political noise coming from President Trump and his administration is one factor that has both international and domestic investors looking to Canada, Jacobs says. “Normally, everybody looks to the U.S., buying U.S. dollars and bonds and real estate to avoid the chaos that’s out there in the world,” he explains. “But the U.S. is the source of the chaos right now, so it doesn’t look like the place for investors to wait out a storm.”
There are also deeper, more positive and possibly longer-term considerations making Canada’s CRE market more attractive, compared not just with the U.S. but also with other world real estate markets. Changing demographics, lower borrowing costs, better government finances and return-to-office pressure by employers are all factors contributing to a positive outlook, Jacobs says.
Retail real estate is actually booming in Canada, and in some regions … the demand for commercial real estate just keeps growing.
Adam Jacobs, Colliers Canada
In August, Ontario Premier Doug Ford ordered the province’s 60,000 workers to be in their offices full-time after Jan. 1, 2026, and many companies and legal and accounting firms have told employees to get back to their buildings.
“It’s a bit early to see how return-to-office will play out, because it’s controversial,” Jacobs says. But the Colliers report notes that “a softening labour market has emboldened employers to push” for workers to be back in the building at least part-time rather than working from home every day.
Canada’s government finances are in better shape than those in the U.S., the report also notes.
“While the U.S. boasts a lower unemployment rate and higher growth, much of this comes from a large amount of federal deficit spending,” it observes. “Whether that can be sustained is an open question.… By comparison, Canada’s debt-to-GDP levels at the federal level remain significantly lower than those of the U.S.”
The size of the U.S. economy makes its government more able to sustain large deficits, but Canada’s more favourable fiscal position provides more flexibility long-term, the report adds. “The cost of debt is significantly lower in Canada, with 10-year bond yields below 3.5 per cent,” it says.
Right now, the Bank of Canada’s key lending rate is 2.75 per cent, compared with the U.S. Federal Reserve key rate of 4.5 per cent. “Real estate is one of the most debt-sensitive industries, so interest rates play an outsized role in the health of the [commercial] market,” the Colliers report says.
The U.S. commercial real estate market is frothier than Canada’s, with higher highs and lower bottoms. But “Canada’s smaller and slower market tends to insulate it” from wild swings, Colliers says. Additionally, the outsized presence of institutional investors in Canada—where ownership of enclosed malls and downtown offices is dominated by $100-billion pension plans—tends to prevent overreaction and “fire sales” during down periods,” the report says.
The U.S. is also overbuilt, both in office and retail, according to the Colliers. Canada has 12.5 square feet of office space per capita and 16.8 square feet of retail, compared with 16.5 square feet of office and 23.5 per cent of retail in the U.S. “The glut of office space creates a drag on the [U.S.] market,” Colliers says.
“Retail real estate is actually booming in Canada, and in some regions, such as Calgary, the demand for commercial real estate just keeps growing,” Jacobs notes.
He concedes that trade wars and tariffs do add costs and uncertainty for developers in Canada. But demographics work in our favour.
“The U.S. is cutting immigration, and though we have had a pullback in population growth and international students, every study I see says this is likely to be temporary. We’ll continue to have a growing, younger population compared not just with the U.S. but also developed countries like Italy and Japan, which have shrinking populations.”
In 2023 and 2024, population growth in Canada was nearly triple the rate of the U.S., and after a retrenchment in immigration this year and next, vendor forecasts see similar growth on the horizon from 2027 onward, the Colliers report says.
Returns on investment have been consistently higher in Canada than the U.S. since 2022, with persistent declines south of the border and mostly positive figures in the north.
“Canada remains one of the top-performing global markets in the [MSCI Commercial Property Price Index], with five-year returns surpassing all G7 nations, as well as Singapore, Hong Kong and Nordic countries,” Colliers says.
Don’t expect the noise from Washington to die down soon, Jacobs says. “Better to focus on the advantages, not the problems.”
David Israelson is a writer, editor, consultant and non-practising lawyer. He is principal of Eon Communications and Research, which he founded after more than a decade as a senior public relations executive. David contributes regularly to national and international print and online publications in addition to corporate and institutional writing across all media. He writes extensively on business, finance and investment, sustainability, conservation, energy, housing and land-use planning, international trade, travel and transportation politics and real estate, among other areas.
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