Morguard flags tight retail, steady industrial and stabilising rentals in 2026
Borrowing costs are easing, and Morguard expects more money to move back into Canadian commercial real estate in 2026—even as the economy grows only modestly.
Morguard Corporation’s 2026 Canadian Economic Outlook and Market Fundamentals Report says Canada’s economy “shifted into a lower gear in early 2025 as US tariffs and global trade tensions weighed on growth and business confidence,” according to Angela Sahi, president and chief executive officer of Morguard.
She adds that “high-quality real estate has continued to demonstrate resilience, supported by stable income performance and a steady flow of private capital into well-located, stabilized assets.”
The firm expects modest growth in 2026 as trade tensions ease and financing conditions improve, with more investment capital projected to enter commercial property as borrowing costs fall, lender appetite improves and bid-ask spreads narrow.
Keith Reading, senior director, Research at Morguard, says “we're beginning to see the signs of renewed momentum across Canada's major commercial property sectors.”
He notes that “industrial and retail assets continue to post healthy fundamentals, and multi-suite residential demand is expected to firm as the economy stabilizes,” and that improving lending conditions should draw investors back to opportunities with stable and growing income and long-term growth potential.
In 2025, investors continued to support high-quality, stabilised assets in retail, industrial and multi-suite residential rental.
In multi-suite residential, the rental market softened in late 2024 and 2025 as weaker rental demand met a notable increase in new supply, but buyers stayed confident in the asset class’s income-driven stability and medium-to-long-term outlook.
Morguard expects demand for multi-suite residential rental properties to continue to exceed supply, with fundamentals gradually stabilising as modestly stronger growth and improving youth employment in the second half of 2026 support firmer rental demand.
It projects vacancy to stabilise, landlord incentives to ease and asking rents to level off as the market moves toward a more balanced environment through 2027, and says demand for multi-suite residential investment properties should gradually stabilise as fundamentals firm by the end of 2026.
The industrial sector posted relatively healthy leasing fundamentals in 2025 even as new supply lifted availability. Investment sales activity steadied, and quality logistics and warehouse assets continued to trade at a healthy rate.
For 2026, Morguard maintains a favourable view on industrial, citing stable demand, moderating availability and income-driven performance, and expects investor confidence to remain strong, helped by improving lending conditions.
In retail, high-quality space remained in short supply in Canada’s most productive centres and shopping nodes.
The retail leasing market tightened through the end of 2024 and into 2025, with vacancy at healthy levels nationally and in community and neighbourhood formats.
Landlords generally achieved strong rents for high-quality space, supported by solid tenant demand.
Morguard expects supply constraints in most major markets to keep conditions tight, support rental and income performance and drive retailer expansion, with Canada’s retail leasing market expected to remain tight and high-quality space in demand.
On the office side, Morguard reports an improved leasing outlook, driven by return-to-office mandates from major financial institutions and the public sector.
Building occupancy increased as more employees returned to physical workplaces, with demand particularly evident for high-quality, efficient space with attractive amenities.
Investors are expected to remain focused on trophy assets, high-quality class A buildings and value-add or conversion opportunities.
