Why Canada’s commercial real estate market may be poised for a comeback for institutional investors
Content from: globe content studio, Published September 15, 2026
After years of headwinds marked by rising interest rates, inflation and the lingering impacts of COVID, Canada’s commercial real estate market is showing signs of stabilization and growth. Institutional investors are reconsidering their allocations and they are looking to increase their exposure.
Yet the recovery is anything but broad-based, says Jennifer Schillaci, managing director and head of Real Estate Equity Investments at RBC Global Asset Management Inc. (RBC GAM Inc.). She notes that Canada had experienced a prolonged period of asset repricing.
“That trend has reversed. We’re now seeing flat to modestly positive performance, with many assets trading at or through the bottom of the cycle.”
To Ms. Schillaci, success in today’s market requires careful selection of assets, sectors and geographies. This deliberate approach distinguishes high-potential opportunities from value traps.
Foundations built on discipline
Canadian commercial real estate has long benefitted from disciplined institutional ownership and durable occupier demand. The sector has proven resilient not because it’s shock-proof, but because it has effectively absorbed disruptions.
The recovery is anchored in resilient net operating income – the revenue properties generate after operating expenses. High-quality buildings continue to maintain strong occupancy, with tenants renewing leases and, in select cases, expanding their footprint.
This stability has reignited transaction activity as institutions, private investors, asset managers, and foreign capital actively pursue select opportunities across office, industrial, retail, and multi-family properties.
These fundamentals have also provided an appealing environment for most commercial mortgage lenders in Canada. Investment managers, banks and life insurance companies have allocated meaningful levels of capital to their lending programs.
This year’s most significant development, Ms. Schillaci says, has been in the office sector, where return-to-office mandates are translating into tangible leasing commitments. However, the benefits are concentrated in premium properties. The market remains highly bifurcated: quality and convenience continue to win, while outdated or poorly located assets struggle to attract tenants.
Nuanced sector dynamics
Other sectors present their own complexities, requiring careful and distinct assessments, says David Nygren, managing director and head of Mortgage Investments at RBC GAM Inc.
“Looking beyond the average numbers is essential in today’s market,” he says. “Market segment, geography, and asset quality demand differentiated analysis.”
In multi-family housing, demand remains robust but it is driven by affordability rather than job growth. Conventional, affordable apartments continue to post low vacancies and rental growth, while luxury units face softer demand and elevated vacancies.
Industrial real estate developers may have moved too quickly in building large warehouse facilities, creating a temporary supply glut that the market is now absorbing. Underlying demand driven by e-commerce and logistics remains resilient.
Not all sectors are stabilizing uniformly. The most acute stress remains concentrated in development land, where higher construction costs, weaker pre-sales, and compressed valuations have contributed to loan defaults and foreclosures. Still, supply dynamics broadly support recovery.
Development activity remains constrained by elevated construction and financing costs. Major projects can take years to complete, and today’s limited pipeline suggests tighter supply conditions ahead.
The case for professional management
This complex landscape underscores the value of professional management. The prevailing cycle will be defined by strong execution, capital structure discipline and platform scale. These capabilities separate institutional-grade managers from opportunistic players.
PH&N Institutional – RBC GAM’s institutional asset management arm in Canada – brings more than six decades of expertise, and identifies value through rigorous market, sub-market, asset-level, and operational analysis.
The team’s flagship vehicles include the RBC Canadian Core Real Estate Fund and RBC Commercial Mortgage Fund. They provide institutional investors with turnkey access to both equity and mortgage opportunities, without the operational complexity of managing individual properties or originating loans.
As the foundations of real estate continue to shift, the next phase of the market cycle will likely reward selectivity, disciplined underwriting, and active management. That favours investors with capital to deploy and the expertise to distinguish high-quality assets from distressed ones.
Mr. Nygren highlights particularly attractive lending opportunities where borrowers are acquiring underperforming properties with plans to renovate, reposition or stabilize them. “Those willing to assume risk now are doing so on projects with compelling fundamentals,” he says.
Selectivity extends to property categories as well, with emerging sectors also gaining traction. RBC’s real estate equity fund has expanded into self-storage and land-lease communities, which can generate attractive yields with lower volatility than traditional property categories.
“The opportunities we see now are strong precisely because properties have withstood difficult conditions,” Ms. Schillaci observes. “Those with liquidity and a willingness to assume measured risk are accessing assets with attractive fundamentals at valuations that may not persist as the market normalizes.”
For institutional investors equipped to navigate this selective recovery, recent market disruption represents a compelling opportunity to re-engage with one of Canada’s most resilient asset classes.
This article is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. PH&N Institutional takes reasonable steps to provide up-to-date, accurate and reliable information, and believes the information to be so when provided. PH&N Institutional and its affiliates assume no responsibility for any errors or omissions or for any loss or damage suffered. PH&N Institutional reserves the right at any time and without notice to change, amend or cease publication of the information. This information is not intended to be an offer or solicitation to buy or sell securities or to participate in or subscribe for any service. Commissions, trailing commissions, management fees and expenses all may be associated with the funds mentioned in this article. Please read the offering materials for a particular fund before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. PH&N Institutional is the institutional business division of RBC Global Asset Management Inc., an indirect, wholly-owned subsidiary of Royal Bank of Canada.
Advertising feature produced by Globe Content Studio with RBC Global Asset Management. The Globe’s editorial department was not involved.
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