With strengthening activity in the latter half of 2025, commercial real estate is entering the new year as the asset type to watch. Retail investment activity remains strong, with sales and leasing activity enjoying ongoing strength in many markets despite macroeconomic uncertainties. Office space is also seeing renewed interest as private investors swoop in to acquire properties given an ongoing pause in construction that will limit options as leasing activity picks up.
“Those that are in the office asset class from an investment perspective see this as a great time to start buying back into the market,” said Kirk Kuester, executive managing director in the Vancouver office of Colliers. “It all really starts with leasing, and we think leasing will pick up from here.”
While downtown vacancies remain elevated at 12.2 per cent according to Colliers, the ongoing return to in-person work arrangements is buoying investor sentiment thanks to the fundamentals of the local market.
QuadReal Property Group’s sale of The Post office and retail complex at 349 West Georgia St. for an estimated $1.2 billion to Spain’s Pontegadea Group is emblematic of the renewed confidence private investors have, particularly in trophy assets.
The deal followed Kingsett Capital Inc.’s acquisition of 700 and 750 West Pender St. from Cadillac Fairview for $125 million.
And more are likely to come, with industry sources indicating BGO has the Oceanic Plaza office tower at 1066 West Hastings St., currently owned by Oxford Properties, under contract.
In Alberta, private investors have led acquisitions of several Calgary office towers. One of the most active has been Nova Scotia-based Armco Capital Inc., which acquired First Tower from Hines, Bow Valley Square from Oxford and the Alberta Investment Management Corp., and First Canadian Centre from GWL Realty Advisors Inc.
In Saskatoon, FP Equities Triogreen West sold the A-class River Centre tower to AMG Real Estate Corp. of Regina.
“People are interested in buying existing buildings, because they’re likely buying below replacement cost,” Kuester explained. “They’re not really interested in buying sites to build buildings. Those that have sites really have no choice today but to look towards building them out.”
But with leasing activity picking up, that could change in constrained markets like Vancouver.
“[The trophy] buildings are clearly out performing the rest of the market, from an occupancy perspective and a rent perspective. The question is, are they now performing at rent levels that are high enough to support a new build?” Kuester asked.
Some estimates put the rent required at $70 a square foot, but many tenants – who have been opting for turnkey space to economize on improvement costs – are shy to commit to a prelease. This is why a property such as the project Hines and Reliance Properties have proposed for 1166 West Pender has yet to start construction in earnest.
Yet if there’s any market likely to see a major new office project kick off, Ray Wong, vice-president, data operations with market insights firm Altus Group, said Vancouver is a top choice because tenant requirements are typically smaller.
“It’s a little bit faster to build something smaller rather than larger,” he said during a review of markets at the end of October.
Wong sees market momentum building not only in office but across sectors.
“You’re seeing a good volume of activity in most of the sectors in Western Canada,” he said. “It looks like we’re getting a little more interest back into the marketplace after a few months of hesitation.”
While multi-family continues to moderate, with investment in Western Canada down 21.5 per cent to $2.2 billion in the first nine months of 2025, industrial benefitted from accelerating demand in the second half of the year and gained 10.7 per cent.
“The No. 1 investment, year to date, is $2.7 billion on industrial, followed by apartment at $2.2 billion,” Wong said.
Industrial land followed at $1.7 billion, and retail at $1.5 billion, while office sales were set to more than double with the fourth-quarter sale of The Post to approach $2.5 billion.
Andrew Petrozzi, director and head of research with Newmark Canada, shares the sanguine outlook.
“The past three to four years was not normal in a sales volume sense. It was a period of very high demand, and so we are now starting to revert back to the kind of sales volumes we saw in the mid-2010s,” he said, discussing industrial sales in Metro Vancouver.
Tenant demand is increasing while completions of new space are poised to lag the uptick as developers scaled back construction over the past 18 months in the face of rising vacancies.
But with vacancies in Metro Vancouver peaking at 3 per cent, still among the lowest in North America, tenants seeking next-generation space as part of a broader flight to quality across asset types have few options.
“Business operators and owners have decided that they have to move on; they can’t hold off and pause or delay,” Petrozzi said. “[The] large-format users are looking to secure new and highly efficient premises, and vacancy is tightening in that segment of the market … because new construction is declining and deliveries have been slowing.”
The result is a new baseline for the market that’s providing a runway for activity in 2026, though a surprise move by the U.S. administration, which suspended negotiations with Canada regarding tariffs last fall and has yet to declare its intentions with regard to renewing the Canada-U.S.-Mexico free trade agreement (CUSMA), could sour the mood.
This is where federal investments in nation-building infrastructure will be key.
“These are significant contributors to industrial development in British Columbia,” Petrozzi said. “That’s a really nice industrial cushion to have.”
And not just in B.C. but across the West.
“Winnipeg is a major national distribution hub, so goods going across the country typically flow through there, so it makes it a big driver for industrial,” said Susan Thompson, research director with Colliers in Vancouver. “If we do see infrastructure projects, that could spur additional demand.”
She believes 2026 has the potential to be “another inflection point for the market.”
Wong agrees.
“We’re finishing off the year a little bit better than anticipated, and hopefully some of that enthusiasm will roll into 2026,” he said.
The one challenge is residential land, where lower immigration led to a population decline across Canada last year. This, as well as affordability issues and improving rental market conditions for tenants, have contributed to lower demand for new homes.
“[Institutional, commercial and industrial] land is still attractive whereas on the residential side we’re still seeing some challenges with new homes and construction activity,” Wong said.
Yet demand for housing is shifting, rather than going away, and as rental units lease up and economic conditions stabilize, the current lack of activity on residential land may be setting the stage for a new housing shortage.
“We’re still going to have this demand for housing,” he said. “We’ll see whether that really impacts [20]27 and ’28, with enough homes to be built to satisfy the demand.”
