Canada CRE Update: Banks Drive Office Demand, Hotel Deals Surge, and Trade Tensions Shape Industrial Market
By Elliot Higgins, CFA – Associate, and Daniel Lester – Analyst
Return to Office: Banks Push for In-Person Work
Canada’s major banks including TD, RBC, Scotiabank, and BMO are spearheading a return to in-person work by implementing new four-day-a-week office mandates for most hybrid employees, effective this fall. This widespread RTO push will significantly revitalize downtown commercial corridors, signaling a key inflection point for Canada’s major markets.. Employers have emphasized building out amenities and quality spaces to incentivize the return-to-office – class A office will be the first to benefit from these mandates.
This widespread RTO push will significantly this trend revitalizes downtown commercial corridors, signaling a key inflection point for Canada’s major markets. The resulting demand for physical office space is creating a supply squeeze for premier “AAA” properties. Ultimately, we have seen this trend create a renewed interest in office assets for both investors and lenders, who previously turned off the tap for this asset class.
Hotel Transaction Volume Rises Amid Major Acquisitions
A notable increase in transaction volume within the Canadian hospitality market signals robust, long-term investor confidence, exemplified by two recent high-profile acquisitions. On August 6, 2025, Choice Hotels International acquired the remaining 50% stake in Choice Hotels Canada for approximately $112 million. The transaction transitions the company from a master franchising to a direct franchising model, enabling the expansion of all 22 of its brands in Canada. Separately, the partnership of Pacific Reach and Dilawri Group of Companies acquired The Ritz-Carlton in Toronto on July 29, 2025.
These deals reflect broader market strength nationwide, as detailed in Colliers’ Q2 2025 Canada Hotel report. The report highlights nearly $1 billion in hotel sales in the first half of the year, with projections to reach $2 billion by year-end, driven by strong operating performance, despite headwinds induced by tensions with the U.S. Key metrics are trending upward, with Revenue per Available Room (RevPAR) increasing 3.4% year-over-year. Asset pricing has surged, as the national average price per key rose 18% to nearly $200,000. Largo maintains a positive outlook on the hospitality market, driven by increasing rental rates and increased liquidity in the market.
U.S.–Canada Trade Tensions Reshape Industrial Real Estate Demand
Recent trade tensions between the United States and Canada have significantly escalated, with a series of new tariffs taking effect on August 1, 2025. The U.S. has increased tariffs on most non-CUSMA compliant Canadian goods to 35%, while a lower 10% rate has been applied to Canadian energy products and potash. In a separate measure, the U.S. also eliminated the de minimis threshold on August 29, 2025, meaning all commercial shipments from Canada valued at $800 or less will now be subject to duties. This escalation follows earlier rounds of tariffs, including Canada’s ongoing 25% retaliatory tariffs on a combined $59.8 billion in American goods, and the Canadian dollar’s brief dip below 0.72 USD reflects growing investor caution.
The Canadian industrial sector has managed to remain resilient via stockpiling and strengthening domestic trade relationships. A July 2025 Prologis survey confirms this, indicating that 36% of companies are shifting to domestic suppliers and 28% are delaying expansion. Manufacturing and logistics centres located near transit hubs will continue to perform well, however, the outlook for some sectors such as automotives remain uncertain, and we will monitor how trade agreement negotiations progress.
