Canada’s commercial real estate markets are entering a clear phase of recalibration and sustained growth in early 2026, with office and industrial fundamentals improving across the country, says commercial real estate firm Colliers.
According to Colliers’ Q1 2026 National Market Snapshot, the narrative has shifted from pandemic-era uncertainty to a “new baseline.” The market is moving towards sustained growth in the office sector, stabilization in industrial and steady, varied performance in retail.
Office market: from “flight to quality” to “fight for quality”
National office vacancy saw a meaningful contraction, declining 100 basis points year-over-year to 13.6%, marking one of the most significant improvements since the onset of COVID. This marks a pivotal right sizing as the market absorbs existing inventory amidst a near-total halt in new office construction, said Colliers.
Leasing activity continues to strengthen in Downtown Class A buildings, underscoring tenant preference for high-quality, well-located space. Return-to-office mandates are having a measurable national impact, helping drive absorption and stabilize demand. With less than 2.0 million square feet of office space under construction nationwide, limited new supply is expected to support further tightening as leasing activity focuses on existing inventory, it added.
At the same time, Colliers said competition for premium office space is intensifying as the market moves from a “flight to quality” to a “fight for quality.” Major tenants are increasingly opting to renew early to secure top-tier space, while incentives and turnkey offerings are becoming more limited in best-in-class buildings. Notably, Edmonton’s office market reached a milestone with anchor tenant ATCO’s relocation to the former Canadian Western Bank Tower at 10035 105 St., marking the city’s largest office transaction in ten years. This dynamic is widening the performance gap between high-quality assets and older, less competitive inventory across Canada’s major markets.
Adam Jacobs
“The decline in vacancy we’re seeing isn’t a statistical blip; it’s the result of a structural rightsizing,” said Adam Jacobs, Head of Research, Canada. “With conversions removing record amounts of obsolete stock and a near-total halt in new builds, the window to secure top-tier space is closing, and we expect this scarcity to drive significant competition through the remainder of 2026.”
Industrial markets at an inflection point
Canada’s industrial market reached an important inflection point, recording its first national decline in vacancy since 2022. Absorption totalled 3.6 million square feet in Q1, outpacing 3.0 million square feet of new supply, with five of six major markets recording quarter-over-quarter vacancy declines. The shift signals a renewed balance after several years of tight conditions and heightened speculative development, said the report
Construction starts remained resilient in the first quarter of 2026, with 5.6 million square feet of new projects breaking ground. This activity was heavily concentrated in Canada’s primary hubs as Toronto, Vancouver, and Calgary collectively drove 76% of all new starts, added Jacobs.
“We are seeing a notable shift in developer confidence; the recent dominance of design-build projects has pivoted back toward speculative construction,” continued Jacobs. “With the total national pipeline now sitting at 24.5 million square feet, the market continues to maintain a healthy and consistent level of active development.”
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Entrepreneur. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 and 2024 as one of the top business journalists in the world by PR News. He was also named by RETHINK to its global list of Top Retail Experts 2024, 2025 and 2026.
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