Canada’s commercial real estate trends in 2025 point to a market in transition. After years of booming investment, activity has slowed as higher interest rates, geopolitical uncertainty, and high construction costs prompt investors to sit on the sidelines or reallocate their funds. Altus Group reports that national CRE investment volume was about $53 billion in 2024, roughly 5% below 2023’s level. By mid-2025 the slowdown was more pronounced: $19.6 billion of investment in H1 2025, a 24% drop from the same period a year earlier. These figures reflect cautious capital deployment and a bid-ask gap between buyers and sellers.
Investors are shifting their focus to perceived safe havens. Industrial investment, which surged during the pandemic, has cooled dramatically – investment in 2024 was down 18% year-over-year – while retail and multifamily (residential rental) assets gained favor. In fact, food-anchored retail strips and multifamily properties surpassed industrial as the most sought-after asset types in 2024. Hotel investments also surged (+48% in 2024) as travel rebounded. In contrast, office buildings and residential land saw large pullbacks. National office vacancy has climbed (about 17.3% in late 2024), especially in older Class B/C buildings, prompting landlords to consider selling or converting them to housing.
Investors should track these Canadian CRE investment shifts carefully, since they signal where capital is flowing – and where it isn’t. In an uncertain environment, capital flows in CRE tend to move toward stable, income-generating assets. Multifamily rentals, grocery-anchored retail and niche sectors (like data centres or student housing) are attracting more interest. At the same time, cold storage, hotel, and purpose-built rental housing were cited as “best bets” for 2025 by industry experts. In short, the market is bifurcating: high-quality, income-producing real estate and mixed-use redevelopments are in demand, while speculative or dated assets face pressure.
Office Market and Vacancies
Office vacancy in commercial Canada is rising, especially outside major downtowns. By late 2024 the national office vacancy rate was about 17.3%, its highest level in years. Class B and C spaces (older, suburban or lower-quality office buildings) saw the sharpest rise – central Class B/C vacancy hit 21.7%. This reflects the “flight-to-quality” trend: tenants are shedding older space and consolidating into premier new or recently upgraded offices.
Many landlords are now considering alternative uses for under-utilized office stock. Owners of chronically vacant office buildings are exploring conversions to multi-residential use. Over 2025, as sublet space dwindles, vacant offices are likely to be removed from the market if redevelopment is viable. This trend is often driven by rising office vacancy in Class B/C assets, even while newer Class A offices remain relatively stable.
Vancouver’s office market is not immune, but it has been somewhat insulated so far. The latest data show Metro Vancouver’s vacancy around 11.4%, lower than the national average. In Q4 2024 Vancouver actually registered positive absorption (office take-up) on the year, despite a dip in Q4. Still, vacancy is up from previous lows and several large new buildings were delivered in 2024. Downtown Vancouver’s vacancy (~11.9% in Q3 2023) is now one of the higher rates in its history. Notably, Vancouver has not had the runaway vacancy crisis seen in oil-dependent cities. That is why Vancouver has not yet experienced a wave of office-to-housing conversions like Calgary or Edmonton. In short, office space in Vancouver remains in moderate demand, but the tide may be turning.
Industrial Sector Trends
Canada’s industrial real estate demand has cooled sharply after years of red-hot growth. Throughout the pandemic, e-commerce and supply chain investment drove unprecedented demand for warehouses and logistics space. Developers responded: a record 35.6 million sq.ft. of industrial space was delivered in 2024. Much of that space was speculative (estimated ~65% unleased at completion), so an oversupply emerged. The result was that net absorption turned negative in 2024, and vacancy began climbing. By year-end 2024 the national industrial vacancy rate had hit 4.8% – the highest in over a decade.
E-commerce growth has plateaued, further moderating demand. During 2019–2021 online retail share of sales in Canada surged, fueling warehouse needs. By 2024 that growth slowed to mid-single-digits, so retailers and 3PLs began downsizing excess space. The net effect: more space is being vacated than leased. Many newly built warehouses are sitting empty or are being offered at sharp discounts. Rents have begun to drop nationally (e.g. –4.6% in 2024) after years of double-digit gains.
This change in industrial fundamentals has prompted investors to pull back. Industrial investment volume fell about 18% in 2024. Lenders face refinancing risks as well, given the high debt on new warehouses and slowing rent growth. In sum, industrial real estate demand in Canada is no longer at its pre-2023 peak. Instead, rising vacancy and declining absorption mean the sector is adjusting – a story investors are watching closely.
Vancouver and Metro Vancouver: CRE Trends
Metro Vancouver remains a very attractive market, but local CRE numbers are also softening. In the first half of 2025, total commercial investment in Greater Vancouver was about $4.3 billion, fully 33% below the same period in 2024. All major sectors saw declines: industrial volume fell 38% YoY; office was down 24%; multifamily plunged 50%; even residential land investment fell 61–63%. The one bright spot was retail: grocery-anchored retail investment grew 17% to $852M.
These shifts reflect broader forces: higher interest rates have made expensive projects harder to finance, and last year’s proposed capital gains tax hike (later scrapped) pulled some deals forward. Geopolitical and tariff anxieties have also weighed on Vancouver. Still, analysts note that Vancouver’s long-term fundamentals remain solid. For now, investor preference in Vancouver has tilted toward core, stabilized assets.
Meanwhile, Metro Vancouver’s office market is moving in the same direction as national trends. Vacant office space in Vancouver has crept above 11%. Although that is low by Canadian standards, it has prompted some condo-style conversions. However, Vancouver’s urban core has resisted large-scale office-to-residential conversion so far. Experts note that Vancouver has long kept housing separate from downtown offices, and vacancy levels never got high enough to trigger a broad cycle of conversions.
That said, Metro Vancouver is aggressively pursuing mixed-use redevelopment in other ways. Aging office buildings and obsolete malls are being reimagined as housing plus offices, retail and amenities. These mixed-use property conversions are seen as one answer to the region’s chronic housing shortage. For example, Burnaby’s Lougheed Town Centre has approvals to add 30 new towers totaling some 11 million sq.ft. of new residential space. Brentwood Town Centre in Burnaby is likewise being transformed; its latest master plan adds 11 high-rise residential towers. Even Vancouver proper is on board: plans for redeveloping the Arbutus Shopping Centre into a new housing community have advanced.
Housing Affordability and CRE Connections
Metro Vancouver’s housing market is famously unaffordable: benchmark home prices often exceed $1 million, and rental vacancy rates run at historically low levels. The juxtaposition of a housing shortage and idle commercial space creates a policy dilemma. Investors and policymakers are thus watching how housing affordability and commercial real estate trends intersect. On one hand, unused or under-used commercial buildings represent a potential source of new housing. On the other hand, the economics are challenging. Nevertheless, city officials and developers are exploring every tool to relieve the housing crunch.
One example: Vancouver’s 2009 Office Conversion Policy allows owners of eligible downtown office buildings to swap unused office floor area for residential development potential elsewhere in the city. Although no major conversion has yet occurred under that policy, the idea illustrates the push to link CRE and housing. In the suburbs, mixed-use master plans effectively do this on a grand scale. Each of these projects recycles aging retail into thousands of new homes.
Ultimately, more integration of CRE with housing development will be needed to improve affordability. For example, policy proposals have floated shifting some tax burdens from residential to commercial properties. Investors should take note: the evolution of CRE toward residential use could reshape supply dynamics.
Fraser Valley: Suburban Housing Opportunities
As Metro Vancouver adjusts, its outer suburbs are already facing the effects. The Fraser Valley (including Surrey, Langley, Abbotsford and nearby cities) has become a focal point for housing investors seeking value. Compared to Vancouver proper, Fraser Valley offers more land, relatively lower prices, and new transit links.
Recent data show Fraser Valley’s market is currently a buyer’s market. By mid-2025 the region had very high inventory and weak sales. In May 2025, for example, sales were down 22% from May 2024 while new listings rose 6.6% year-over-year. Active listings hit 10,626 by May – the highest since 2019. Home prices have dipped: benchmark prices fell ~1–3% across detached, townhouse and condo segments in spring 2025.
Surrey leads the region by a wide margin. In 2024 Surrey accounted for 51% of all Fraser Valley sales, followed by Langley (24%) and Abbotsford (15%). Those suburbs also experienced the most new development. With prices lower than Vancouver’s core, investors can often achieve higher yields in Fraser Valley rentals or subdivisions.
For CRE investors, the Fraser Valley represents both a leading indicator and an opportunity. Already by late 2024/early 2025, Fraser Valley had an unusually high number of new condo and townhome projects in the pipeline. The market’s current softness means disciplined investors can pick up land or projects at better prices. The Fraser Valley residential investor opportunities are significant, especially for those looking to hedge against Vancouver’s downturn.
Mixed-Use Redevelopments and Future Opportunities
Beyond specific office or industrial assets, Canadian CRE capital flows are shifting toward broader redevelopment plays. Investors are increasingly attracted to large projects that blend uses. In Metro Vancouver, this is seen in the mall-turned-mixed-use phenomenon. The Urban Land Institute notes that Vancouver has become a forerunner in repurposing aging retail centres into massive communities with housing, offices, hotels, parks and retail. These mixed-use property conversions are happening in both suburbs and, selectively, in the city.
Key examples include:
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Lougheed Town Centre (Burnaby): Plans approved call for adding 30 new high-rise towers on top of the old mall site. The project would create over 11 million sq.ft. of residential floor space, plus offices, hotel rooms, shops and open space.
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Brentwood Town Centre (Burnaby): Brentwood’s redevelopment adds 11 residential towers to the existing low-rise retail centre.
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Arbutus Shopping Centre (Vancouver): A plan by Dialogue Architects shows the old strip mall redeveloped with mid-rise condos and a grocery store, creating a new residential community.
These examples show how capital is reflowing from obsolete assets into new development. Thousands of new apartments and condos will come on line in places that were once parking lots and low-rise malls. Investors are watching mixed-use property conversions in Vancouver closely: they offer a way to gain exposure to Vancouver-area housing growth, albeit through a commercial development lens.
Why It Matters to Investors
The shifts in Canada’s commercial real estate market are a leading indicator of economic trends. As capital reorients, investors should ask: Where will my next returns come from, given these trends?
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Portfolio repositioning: Many investors have already reduced exposure to pure office or industrial buildings, redeploying capital into rental housing, medical offices, and specialized real assets. Those capital flows will continue to influence which projects get funded.
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Development opportunities: Owners of commercial land or buildings are starting to rethink use. Golf courses, parking lots, and empty offices could be rezoned for housing. Investors who can acquire properties with redevelopment potential may find outsized gains when the market turns.
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Risk management: Rising office and industrial vacancies pose risks. A major CRE downturn could create bargains but also require careful selection. Savvy investors are analyzing submarkets.
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Housing market linkage: In Metro Vancouver, CRE trends tie directly to the housing market. If conversions add supply, it could slow price growth. Conversely, if conversions stall, Vancouver’s affordability crisis may worsen.
In summary, Canada commercial real estate trends for 2025 are signaling a period of rebalancing. There is a Canadian CRE investment shift underway. Office vacancy (commercial Canada) is high and rising. Industrial real estate demand is moderating. Capital flows are favoring housing and retail-based properties. For Metro Vancouver, this means the residential market impact could be significant.
Investors who pay attention to these dynamics can uncover opportunities. Whether it’s participating in mixed-use conversions Vancouver, financing new rental developments, or targeting the Fraser Valley residential investor opportunities, the shifting landscape offers new angles. Keeping an eye on CRE trends will be essential for smart investment decisions in the coming years
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Frequently Asked Questions (FAQs)
1. Why is commercial real estate investment declining in Canada in 2025?
High interest rates, increased construction costs, and broader economic uncertainty have made investors more cautious, leading to a drop in total CRE volume.
2. What types of properties are still seeing strong demand?
Multifamily rentals, grocery-anchored retail, and niche assets like student housing and cold storage continue to attract capital.
3. Will vacant office buildings in Vancouver be turned into housing?
Some older, high-vacancy buildings may be candidates for residential conversion, though Vancouver's vacancy rates haven't risen enough yet to trigger widespread conversions.
4. Is the Fraser Valley a good place to invest right now?
Yes. With higher inventory, lower prices, and strong long-term demand, cities like Surrey and Langley offer compelling opportunities.
5. How do mixed-use redevelopments affect the housing market?
By turning under-used retail and commercial spaces into residential communities, these projects can help increase housing supply and moderate price growth over time.
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