The Canadian commercial real estate market is set for significant transformation over the next five years. Forecasts project growth from approximately CAD 118.60 billion in 2025 to nearly CAD 170.98 billion by 2030, reflecting a compound annual growth rate (CAGR) of about 7.6%. This detailed analysis highlights key segments—including industrial, office, retail, multi-family, and hospitality—while integrating regional insights from major urban centers to emerging markets such as Kelowna.

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Market Overview and Forecast

Strong macroeconomic fundamentals and evolving consumer trends have laid the groundwork for robust market performance. Analysts expect that sectors like industrial and logistics will drive value, supported by record-low vacancy rates and rising rental figures. In parallel, shifts in workspace dynamics and consumer behavior are spurring demand for modern office environments, innovative retail formats, and purpose-built multi-family housing. Municipal investments and infrastructure enhancements in emerging areas, exemplified by Kelowna, further complement these trends. The integration of data from national markets and regional hotspots provides a comprehensive view of a sector positioned for sustained growth through 2030.

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Industrial and Logistics

The industrial segment continues to serve as a market powerhouse. In Q2 2022, national vacancy rates in this sector fell to as low as 1.5%, while average asking net rents surged by 17% year-over-year to approximately CAD 17.32 per square foot. Robust pre-leasing activity is evident, with about 64.4% of space under construction already committed by leading tenants. Regions such as Kelowna are increasingly attractive for industrial developments, reporting competitive rental rates—around CAD 16.44 per square foot—and occupancy levels approaching 98%. The strong performance across diverse geographies underlines the impact of e-commerce growth, supply chain reorganization, and the ongoing demand for last-mile delivery facilities.

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Evolving Office Space Trends

The office segment is undergoing a marked shift as companies realign their workspace strategies. While overall office vacancy rates across major cities have averaged around 15.7% during 2022, there is a clear trend toward the "flight-to-quality." Premium Class A properties in cities like Toronto and Vancouver continue to attract significant leases, with high-profile transactions such as Microsoft signing a lease for roughly 400,000 square feet in Vancouver. In addition, flexible and amenity-rich workspaces are gaining traction in emerging markets such as Kelowna, where office leasing activity is growing at an estimated 8% annually. These developments underscore how businesses are prioritizing adaptable, high-quality environments to meet the demands of a hybrid workforce.

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Retail Sector Resilience and Omnichannel Adaptation

Despite evolving consumer preferences, the retail sector has exhibited notable resilience. For example, Montreal’s retail market experienced approximately a 30% increase in annual sales in 2022. Similar trends are observed in more regional markets like Kelowna, where mixed-use developments and strategic renovations have driven rental rate increases of 5–7% in prime locations. Retailers are now leveraging omnichannel strategies that combine physical storefronts with digital commerce, transforming traditional spaces into experiential destinations. This adaptive approach not only sustains consumer engagement but also supports a stable revenue stream for investors and property owners alike.

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Multi-Family Housing

The multi-family segment remains one of the most dynamic components of Canadian commercial real estate. Witnessing consistently low vacancy rates—often around 3%—and experiencing strong rental growth, this sector has become a cornerstone for long-term investment. In major urban centers, rent increases have reached double-digit figures, while areas such as Kelowna report year-over-year rent growth close to 10%. Factors such as rising home prices and demographic shifts are driving demand for rental housing, encouraging both institutional investors and private capital to commit to development projects that offer reliable yields and diversification in their portfolios.

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Tourism, Business Travel, and Innovation

The hospitality sector is primed for accelerated expansion in the coming years. Projections indicate an annual growth rate of approximately 10% from 2024 to 2029. Gateway cities such as Toronto, Vancouver, and Montreal continue to lead this charge, with rising occupancy rates and average daily rates bolstered by innovative service models—ranging from extended-stay hotels to boutique properties. Even regions traditionally known for leisure and resort appeal, like Kelowna, are witnessing noticeable improvements in hotel performance. Increased tourism, combined with a resurgence in business travel, is fueling investment in modern, mixed-use hospitality assets that efficiently blend accommodations with retail, dining, and entertainment options.

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Regional Dynamics and Investment Trends

At the national level, major urban centers like Toronto, Vancouver, Montreal, Calgary, and Ottawa continue to anchor commercial real estate activity. For instance, recent transactions in Ottawa totaled around CAD 5.43 billion, reflecting strong investor confidence. Simultaneously, emerging markets—including Kelowna—are capturing more attention due to strategic municipal investments. Kelowna’s local government has reportedly allocated 10–15% of its regional infrastructure budget toward enhancing commercial corridors, which is catalyzing growth in both office and industrial sectors. These regional efforts, combined with the broader emphasis on sustainable building practices and smart property management, provide a robust foundation for the market’s future performance.

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Conclusion

The period from 2025 to 2030 represents a defining phase for Canadian commercial real estate. With growth trajectories supported by industrial strength, evolving office dynamics, resilient retail performance, a booming multi-family sector, and an innovative hospitality segment, the market is poised for widespread transformation. Coupled with strategic regional investments—ranging from established financial hubs to rising markets like Kelowna—stakeholders have diverse opportunities to secure sustainable returns.

At Coldwell Banker Horizon Realty, our commitment to strategic insight and localized expertise empowers clients to navigate this multifaceted landscape. By focusing on quality, sustainability, and technological integration, investors and developers can make informed decisions and capitalize on the evolving dynamics of Canadian commercial real estate well into the future.

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Note: All monetary values have been converted from USD to CAD using the exchange rate of 1 USD = 1.43 CAD as of February 24, 2025. Exchange rates may fluctuate over time.

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Source: Mordor Intelligence