Avison Young's Q2 2026 data shows quality assets drawing fresh capital across all property classes
Canada's commercial real estate market entered the second half of 2026 in a more confident posture than it has held in years, with Toronto emerging as the dominant engine of national investment activity.
Avison Young's Q2 2026 Canadian cap rate and investment trends report found a market defined less by broad optimism than by a precise and disciplined hunt for quality across multifamily, industrial, office, and retail assets.
Private investors accounted for approximately 52% of acquisitions by sales volume in Q1 2026, according to CoStar data cited in the report, while institutional capital — including insurance groups, private equity, mid-sized funds, and real estate investment trusts — is re-engaging at scale.
The Bank of Canada (BoC) has held its policy rate at 2.25%, and while that has sustained pressure on financing costs, lenders are demonstrating strong appetite for experienced sponsors and assets with durable income streams, according to Brian Marshall, vice president of Debt Capital and Advisory at Avison Young in Vancouver, British Columbia.
"Investor appetite is evolving, with growing interest in real estate assets that saw limited traction 12 to 18 months ago, notably large-bay industrial and office assets," said Tim Loch, AACI, P. App., principal, senior director and practice leader of Investment Valuation and Advisory at Avison Young Canada.
"While core product remains the primary driver of activity, increased deal flow is improving price transparency and supporting renewed confidence."
Read more: Could the Bank of Canada hike interest rates before the end of 2026?
Office and multifamily lead the quality chase
The office sector is showing its most sustained momentum since before the pandemic.
National net absorption reached +2.6 million square feet (msf) in Q1 2026 alone, building on the positive absorption recorded nationally in 2025. That's a notable turnaround after -17 msf of negative net absorption between 2020 and 2024, according to Avison Young's data.
Trophy and class A assets are leading that recovery: since 2025, Trophy sales have accounted for 25% of total office square footage transacted nationally, compared with just 8% between 2020 and 2024.
Benchmark downtown class A cap rates in Toronto sit at 6.00% in Q2 2026, per the Avison Young survey.
CBRE reported a fourth consecutive quarter of positive office absorption, led by Toronto, Calgary, and Montreal, as tightening premium office supply begins boosting demand across other asset classes.https://t.co/UZgoyunkVa
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 7, 2026
In multifamily, the Canada Mortgage and Housing Corporation (CMHC) forecasts positive rental household formation nationally in 2026, driven by younger cohorts who are more likely to rent as homeownership costs remain out of reach.
According to CMHC's Spring 2026 Housing Supply Report, Canada's housing starts rose 6% in 2025, driven largely by record purpose-built rental construction. Toronto's high-density urban multifamily cap rate stands at 3.90%, the tightest of any major market surveyed.
Read more: Canadian multifamily investment rebounds, offering positive signs for 2026
Industrial and retail: diverging dynamics, shared discipline
Industrial leasing remains firm, particularly among logistics and supply chain-focused occupiers prioritising modern, high-clearance facilities.
Avison Young data shows the average cap rate spread between mature and newer industrial assets has widened by 10 basis points over the past 18 months, reflecting investors' preference for newer stock.
In Calgary, Nathan Drury, vice president of Capital Markets at Avison Young, described available industrial investment product as "heavily oversubscribed," with the market on pace for a record year of transaction volume in 2026.
The retail sector is drawing renewed institutional attention through a different mechanism: portfolio-level transactions rather than individual asset acquisitions.
The $9.4 billion sale of First Capital REIT to KingSett and Choice Properties in Q2 2026 signalled the depth of demand for grocery-anchored, open-air shopping centres.
Investors are also broadening their search radius beyond primary markets, as population growth and improving tenant performance in peripheral locations narrow the historic premium gap between primary, secondary, and tertiary assets.
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