“Everything is hard in real estate right now. It’s like we’re parents of teenagers.”
The Canadian real estate industry is navigating a period of profound transformation, marked by both significant challenges and emerging opportunities. While housing supply and affordability remain at the centre of national attention—given their outsized impact on the broader economy and real estate sector—the market’s story is far more diverse. Asset classes such as retail, student housing, self-storage, and industrial properties are demonstrating resilience and, in many cases, outperforming expectations.
Housing: The Economic Multiplier and Sector Catalyst
Housing continues to be the sector’s most pressing issue, with affordability and supply constraints affecting not only homebuyers and renters but also the health of the entire real estate ecosystem. The multiplier effect of housing means that delays or failures in addressing these challenges will have ripple effects across other asset classes, from retail foot traffic to industrial demand and beyond.
Recent policy shifts and government incentives are beginning to support new rental and affordable housing development. Notably, the federal government’s launch of Build Canada Homes (BCH) represents a significant commitment to accelerating housing supply, providing funding and policy tools to enable more affordable and purpose-built rental construction across the country.
A key feature of the BCH plan—and a recurring theme in this year’s interviews—is the emphasis on innovative construction methods, particularly prefabricated and modular housing. These approaches are being prioritized to speed up delivery, reduce costs, and address future labour shortages, making it possible to scale up housing supply more efficiently. These measures, alongside provincial and municipal initiatives, are helping to lay the groundwork for increased supply. But the path forward requires continued innovation, cross-industry collaboration, and streamlined regulatory processes to fully address the scale of the challenge.
Looking across the country, Calgary stands out as a market of relative strength and resilience. The city has experienced record levels of new home construction, supported by strong population growth, more affordable land, and proactive municipal policies. Purpose-built rental stock in Calgary has surged, and vacancy rates, while rising, remain manageable as the city continues to attract new residents and investment.
Strength Beyond Housing
Despite the focus on housing, other segments of the market are performing well and attracting capital. Retail properties—especially grocery-anchored and open-air formats—are experiencing strong tenant demand and robust rental performance, with experiential and mixed-use developments gaining traction. Student housing is emerging as a high-potential asset class, driven by demographic trends and institutional partnerships, even as immigration policies evolve. The self-storage sector is benefiting from urban densification and changing consumer needs, while industrial real estate, though past its recent growth peak, remains a solid performer in several regions, particularly in categories such as small-bay assets and data centres.
Seniors’ housing is also gaining momentum as demographic shifts accelerate demand for new and innovative care models. Investors and operators are increasingly focused on developing modern, operationally efficient facilities that address the needs of an aging population. This includes not only traditional retirement residences but also medical office space (rebranding as outpatient delivery centres) and community-based care solutions, which are proving resilient and attractive even amid broader market uncertainty. The growing interest in seniors’ housing highlights the sector’s potential for stable returns and its critical role in meeting Canada’s evolving social and health care needs.
Dealmaking: Signs of Optimism amid Uncertainty
While distress-driven transactions—particularly those involving land and development assets—have meaningfully increased, deal activity is broadening beyond these constrained segments. Creative deal structures, new sources of capital—including private real estate investment trusts (REITs), family offices, infrastructure funds, and private debt—and a narrowing gap between buyer and seller expectations are fuelling renewed optimism. Investors are increasingly looking beyond traditional asset classes, with private capital stepping in to fund emerging opportunities in student housing, medical offices, and other alternative sectors. This shift signals a market that’s adapting to uncertainty with agility and innovation.
At the same time, a notable trend is emerging around the value of land held for condominium development in Toronto and Vancouver. In the current environment, some interviewees view this land as significantly impaired—its value has dropped sharply due to the collapse of the condo pre-sale model, high carrying costs, and limited prospects for near-term project viability. As a result, owners of such land are facing tough decisions, including selling at a loss, pivoting to alternative uses such as purpose-built rental, or seeking joint ventures with institutional or nonprofit partners. This dynamic is reshaping deal flow, as well-capitalized buyers and creative investors look to acquire or repurpose distressed land assets, further contributing to the evolving landscape of real estate transactions in Canada.
Strategic Reinvention for a Complex Future
Success in today’s market is no longer about simply identifying the best asset class or city—it’s about recognizing and capturing the right opportunities at the intersection of real estate and other industries and executing with operational excellence. This year’s interviews highlighted numerous examples of an evolving investable thesis around real assets, where value is being unlocked far beyond traditional property boundaries.
Interviewees described how real estate companies are partnering with technology firms to develop smart buildings, collaborating with energy providers to integrate clean power solutions, and working with health care and life sciences organizations to create new models of care and community living. The accelerating rise of data centres, modular construction, and mixed-use developments further illustrates how real estate is enabling new domains of growth.
The integration of technology—especially artificial intelligence (AI)—is not only driving efficiencies and new business models within real estate, but also enabling the sector to unlock value in adjacent domains such as energy, digital infrastructure, and health. Partnerships across industries—including with government and nonprofits—are creating new opportunities, from sustainable energy generation to community-based care solutions.
The investable thesis for real estate is evolving: value is increasingly found in assets that enable cross-industry collaboration. Companies that embrace reinvention, invest in talent and digital capabilities, and maintain a disciplined yet creative approach to capital will be best positioned to thrive—not just as real estate operators, but as key enablers of the next wave of economic and societal transformation.
Optimism Rooted in Adaptation
Beneath a cloud of macroeconomic uncertainty lies the opportunity to chart a new path. “Overall, we’re optimistic on Canada,” said one developer. “We’ll have a tough few years, but there’s [an] upside.” This optimism is rooted not in a return to the old market, but in the potential to adapt and find emerging sources of growth. The Canadian real estate sector faces a challenging environment, but also one rich with opportunity. Addressing housing is essential, but the industry’s future will be shaped by its ability to adapt, diversify, and innovate across all asset classes. As deal activity picks up and new growth domains emerge, the sector is poised to chart a new path—one defined by resilience, collaboration, and long-term value creation.
