Return-to-office momentum to tighten urban commercial markets, while activity in industrial segment stabilizes

The forces shaping today’s economy are extending well beyond household finances and residential real estate. They are also influencing how businesses plan, invest and choose where to operate.

Global trade tensions are increasingly influencing commercial real estate activity. Across Canada, office and industrial markets are evolving as businesses adapt to economic uncertainty. Industrial activity has stabilized in many cities, while demand for office space is gaining momentum as more employers increase in-person expectations. Together, these trends are reshaping the commercial landscape, according to the newly-released Royal LePage® 2026 Commercial Real Estate Report. 

“Much like the residential real estate sector, broader economic uncertainty has weighed on commercial real estate decision-making in recent years,” said Matt Jacques, interim general manager, Royal LePage® Commercial™. “What’s different heading into 2026 is the growing sense of stability. Businesses are no longer reacting to every economic headline and are instead taking a more deliberate, long-term approach to space planning and investment decisions.

“While caution remains, there is optimism that market conditions are beginning to normalize. As confidence gradually rebuilds, we expect to see more consistency in activity across both office and industrial markets throughout Canada. Regional variations, however, mean this trend will unfold diversely across the country.”

Back-to-office momentum lifts leasing activity

As Canada’s corporate workforce increasingly faces return-to-office requirements, office real estate in major cities is expected to continue its gradual recovery in 2026.

Pandemic-driven adoption of remote and hybrid work models weighed heavily on downtown office markets and dampened leasing activity. That dynamic has shifted, however, as major employers such as Royal Bank of Canada, Rogers Communications and Starbucks Canada recalled staff to their corporate offices in 2025 and early 2026, implementing three-, four- and five-day in-office work schedules. Federal employees will also be back in office four days per week, beginning this summer.

“The past two years have been pivotal for the office sector, which has steadily regained momentum following the unprecedented disruption of the pandemic, when downtown cores saw office towers largely empty during lockdown periods. The market is not returning to its pre-pandemic form; rather, it is evolving into something more deliberate and intentional,” said Jacques. “Employers are placing greater emphasis on how space can be used rather than how much space they take up, prioritizing layouts that support collaboration, flexibility and employee experience. That shift is increasingly shaping leasing decisions across the country.

“While hybrid work models will remain part of the equation long-term, rising in-office attendance and clearer workplace strategies are helping to bring greater stability to the market.”

According to a survey of Royal LePage commercial real estate market professionals across the country, 66% of experts expect occupier demand for office space to modestly increase or stay the same in their respective market in 2026. Five per cent expect demand will increase significantly. Meanwhile, 42% of experts expect vacancy rates for office space to decrease in their market this year.

Industrial sector holds steady amid economic uncertainty

Industrial real estate is expected to remain one of Canada’s strongest-performing commercial asset classes in 2026. Although rental growth for industrial spaces has moderated from pandemic-era highs, demand fundamentals remain intact, supported by e-commerce activity, supply chain reconfiguration and the continued need for warehousing and distribution facilities.

Manufacturing sales rose sharply in the early stages of the post-pandemic recovery, driven by the reopening of the economy post-lockdown and pent-up consumer demand. This sustained level of activity has been a key driver of demand for industrial real estate across Canada. More recently, however, momentum in the sector has softened amid ongoing trade disruptions, which continue to pose a risk to demand for industrial space. According to Statistics Canada, approximately half of manufacturers reported being affected by tariffs through various channels, most notably price increases and higher expenses for raw materials. 

“The industrial sector has consistently demonstrated its resilience. While there are ongoing economic risks tied to trade policy, tariffs and broader global uncertainty, demand for well-located, functional industrial space remains strong. This is especially true in logistics- and trade-connected markets, where proximity to transportation corridors, ports and population centres continues to drive occupier interest,” said Jacques.

“Looking ahead, a slowdown in new construction and ongoing supply chain realignment will support market balance. As businesses prioritize efficiency and speed to market, the creation of modern industrial facilities will remain a critical component of Canada’s commercial real estate landscape.”

Nearly half (47%) of Royal LePage commercial market experts expect occupier demand for industrial space to increase in their respective markets in 2026.

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NATIONAL PRESS RELEASE

DATA CHART