Canada’s commercial real estate market is poised for a mixed but cautiously optimistic year ahead, according to a new 2026 forecast from Royal LePage. The report suggests that the office sector is set to regain ground as more employers scale back remote work policies, while the once-booming industrial segment experiences a slowdown amid persistent global trade disruptions.
The office market, which was hit hard during the height of pandemic lockdowns, is gradually stabilizing. Royal LePage’s survey of commercial real estate professionals across the country indicates that two-thirds expect demand for office space to either increase modestly or hold steady in 2026. A smaller share about five percent anticipates a significant jump in demand.
Vacancy rates may also improve. Roughly 42 percent of those surveyed believe office vacancies will decline in their respective markets this year, a sign that companies are steadily bringing employees back into physical workplaces.
Among Canada’s largest urban centres, Montreal recorded the highest overall commercial vacancy rate in 2025 at 5.2 percent. Calgary followed at 3.8 percent, with downtown Vancouver close behind at 3.6 percent. In the Greater Toronto Area outside the downtown core, vacancy stood at 3.4 percent. Greater Vancouver reported a rate of 2.9 percent, Ottawa 2.5 percent, and downtown Toronto posted the lowest vacancy level at 2.1 percent.
Industry leaders note that the office environment is not reverting to its pre-pandemic model. Instead, workplaces are being redesigned with a sharper focus on collaboration, flexibility and employee experience. Hybrid work arrangements are expected to remain in place for many organizations, but higher in-office attendance is projected to lend greater stability to the sector overall.
“The office market isn’t going backward it’s transforming,” said Matt Jacques, interim general manager of Royal LePage Commercial, in a statement. He described the past two years as a turning point for the sector, emphasizing that businesses are now prioritizing how space is used rather than simply how much of it they occupy.
Meanwhile, industrial real estate long considered one of Canada’s strongest commercial asset classes continues to demonstrate resilience, though at a more moderate pace. Nearly half of survey respondents expect demand for industrial space to rise in 2026.
The sector benefited heavily from pandemic-driven shifts in manufacturing and logistics, with monthly manufacturing sales consistently ranging between $65 billion and $75 billion in recent years. However, overall sales dipped slightly last year, falling by 0.4 percent. The decline was largely attributed to weaker performance in petroleum, coal and chemical industries sectors particularly vulnerable to price fluctuations, tariffs and supply chain instability.
Despite these challenges, demand for strategically located industrial properties remains solid, especially in markets connected to major transportation routes, ports and densely populated regions.
While trade uncertainties continue to cloud the outlook, industry observers say the broader commercial real estate landscape appears to be entering a phase of adjustment rather than decline. With evolving workplace strategies and ongoing demand for logistics infrastructure, 2026 could mark a year of recalibration and renewed confidence across Canada’s commercial property markets.
