Q1 Real Insights | Capital flows and trends in Canada’s key corridors

Canada enters 2026 with a cooling economy but surprising resilience, and the real estate market is adjusting in real time. Investment is retreating in Vancouver, accelerating in Edmonton, and recalibrating in Montréal as each city responds to shifting demographics, interest‑rate pressures, and evolving demand across office, industrial, retail, and multifamily.

Catch the top trends in our video snapshot, then explore the full analysis below.

Economy

Despite the shocks of U.S. trade hostility and geopolitical unrest, the Canadian economy is now being described as sluggish but surprisingly resilient. Energy-producing provinces stand to benefit from price spikes resulting from the expanded conflict in the Middle East. However, lower-income consumers will suffer if inflation starts to rise again. Interest rates are unlikely to decline before 2027.

RBC forecasts 1.1% per-capita GDP growth for 2026, despite a population decline of more than 100,000 in 2025 due to reductions in the number of temporary foreign workers, non-permanent residents, and foreign students. Unemployment is relatively stable at 6.7% nationally, with marginal increases in most provinces (0.0% in B.C., 0.1% in AB, and 0.7% in
Québec).

Québec GDP growth for 2026 is forecast at 0.8%, with its manufacturing output continuing to trend downward. Its exposure to U.S. tariffs is significant due to the nature of its exports: aluminum, steel, copper, and lumber.

The 30% increase in oil prices that swiftly followed the attack on Iran will benefit Alberta, whose 2026 GDP is now forecast at 2.5%. Alberta is also one of the few Canadian provinces that continues to see population growth from in-migration as well as immigration.

B.C.’s projected GDP has been downgraded slightly by economists to 1.1% after experiencing some of the country’s largest population declines in 2025. Premier Eby has said the province won’t take advantage of a federally adjusted increase in temporary foreign worker quotas.

Investment Activity

Vancouver investment activity declined 14% in 2025 to $9 billion. Multi-family, industrial, and land sectors saw decreases between 20% and 49%. Retail investment increased 31% and office 92%, with Pontegadea’s $1.2-billion purchase of Canada Post’s former downtown distribution centre. Ranked as Canada’s second preferred market (after Halifax), Vancouver investors are now looking for higher yields that will preserve capital.

The B.C. Supreme Court’s 2025 ruling in Cowichan Tribes v. Canada indicated the relationship between fee-simple ownership and Aboriginal title has not yet been settled in law. The ruling has made both lenders and developers in the Richmond area significantly more cautious. Due diligence costs and land development delays have increased as investors perceive a greater risk of renegotiation and/or litigation with First Nations. Land valuations in the area have been discounted. With nearly 80% of B.C.’s land subject to unresolved Indigenous claims, institutional investors will be looking for higher yield, safer investments.

Edmonton’s 2025 investment volume was a record $3.3 billion, almost half –$1.5 billion – from multifamily. Industrial and multifamily led investment growth, while office and retail lagged. Return-to-office mandates should help reduce an office vacancy rate of almost 20%. Suburban office is still significantly more desirable than downtown. Edmonton’s retail vacancy rate is hovering just below 4%, with grocery-anchored, service retail, and value-oriented centres outperforming. Industrial asset class growth is being restrained by tightening supply, with only 850,000 square feet under construction and around 4% vacancy. Both the office and industrial sectors continue to experience the flight to quality. Investors are employing defensive, income-focused strategies.

Montréal’s downtown office vacancy rate may be peaking at close to 19%. With aging buildings becoming obsolete, adaptive reuse as residential or mixed-use developments might be the solution. New industrial supply delivered in 2023 and 2024 and the rationalization of logistics warehousing as e-commerce expansion slows, tariffs shift, and geopolitical uncertainty increases means businesses are reconsidering their business processes and warehouse needs. Multifamily is still very attractive, due to continued population growth, immigration, renter-heavy demographics, and a strong urban employment base. Affordable supply is constrained, while new luxury units are less in demand, with a 6% vacancy rate versus 1.5% for affordable units. Demand for retail space exceeded supply in both 2024 and 2025 as tourism numbers increased 7% in 2025 and spending reached $5.8 billion. New luxury districts and entertainment complexes designed to capture both local and tourist spending like Royalmount, Meastria, and Tour des Canadiens are favoured. Investors prefer grocery-anchored centres, high-traffic mixed-use retail, and tourist-driven shopping streets, and are now prioritizing income durability over appreciation.

Key Trends

B.C. lost 41,000 people over the course of 2025, and is projected to lose 0.4% of its population in 2026. The decrease in non-permanent residents and available foreign student visas are major factors in the population decline, but out-migration to Alberta due to B.C.’s high cost of living is another factor. A surge in rental construction has meant average rents have dropped 6.8% throughout the province, while the 2026 provincial budget included the disappointing news that $775 million worth of proposals to develop 4,600 units under the Community Housing Fund, launched in May 2025, would not proceed.

Until the Supreme Court of Canada rules on the appeal of Cowichan Tribes v. Canada, more developers may seek partnerships with Indigenous governments. Some of Vancouver’s biggest multi-family developments are joint ventures with MST Developments. They include Sen̓áḵw (6,000 units in Kitsilano); 13,000 homes planned with Jericho Lands Development, and 2,600 homes as part of the Heather Lands Development.

Industrial and multifamily sectors continue to yield the greatest cash flows and potential for growth in Edmonton, making investment in industrial before rents start to climb again an attractive proposition. With only 850 square feet of industrial under construction, the drop in supply is leading towards a tighter market.

The longer the U.S.-Israeli military action lasts, the higher oil prices will rise, which could lead to additional growth for Edmonton’s retail sector. Government return-to-office mandates should lead to some improvement in the office sector.

Transit-oriented, mixed-use developments are in favour in Montréal, as the Société de transport de Montréal has announced its intention to participate in real estate development at metro stations. So far, 13 priority sites have been identified that could lead to the development of 4,000 housing units as the Blue Line adds five more stations in Montréal’s east end by 2031. High financing costs means speculative industrial building is on hold, which could result in a supply shortage by 2027.