Canada Market Update: April 2026
By Daniel Lester – Analyst
1. Bank of Canada Expected to Hold at 2.25% on April 29
The Bank of Canada held its overnight rate at 2.25% at its March 18 meeting, the fourth consecutive hold, and is widely expected to hold again at tomorrow’s announcement. Markets are pricing a 93% probability of no change, with the decision accompanied by the quarterly Monetary Policy Report. March CPI came in at 2.4% year-over-year, up sharply from 1.8% in February, driven almost entirely by a 21.2% month-over-month surge in gasoline prices, the largest single-month increase on record. Core inflation (trimmed mean/median) held at approximately 2.3%, and CPI excluding energy rose just 2.2%, signalling that the energy shock has not yet passed through to underlying prices.
With GDP down 0.6% in Q4 2025 and unemployment at 6.7%, the economy is too soft to hike and inflation too energy-driven to cut. April CPI, due May 19, is expected to print higher as the carbon levy base-year effect drops out. The C.D. Howe MPC voted unanimously to hold, with a median path of 2.25% through October and a single 25 bps move to 2.50% by April 2027.
2. Office and Industrial Vacancy Decline Simultaneously for First Time Since 2020
Colliers International’s Q1 2026 report shows national office and industrial vacancy rates declining concurrently for the first time since the pandemic began. Office vacancy fell one percentage point year-over-year to 13.6%, while industrial vacancy tightened to 3.5%.
The office recovery is less about demand and more about supply removal. New construction has ground to a near-halt, with less than two million square feet currently underway nationally, compared to 1.8 million square feet delivered every quarter between 2021 and 2023. Return-to-office momentum, particularly in Toronto, has been more rapid than most analysts expected. Leasing demand remains concentrated in top-tier assets, and secondary and suburban product continues to face an uphill battle. Tightening to the 5 to 10% vacancy range that characterized pre-pandemic conditions is years away, if achievable at all.
Industrial is coming off a brief tariff-driven shock and recovering firmly. Absorption of 3.6 million sq. ft. outpaced new supply of 3.0 million sq. ft. in Q1, with Toronto, Vancouver, and Calgary driving 76% of new construction starts. Speculative development is picking back up in major hubs as occupier demand holds. CUSMA renegotiation remains a short-term wildcard, with some tenants in trade-exposed sectors delaying leasing decisions pending clarity on cross-border supply chains.
Lender appetite on industrial is strong across most markets. Office remains bifurcated: life insurance lenders are active on well-leased, transit-proximate assets, while secondary product continues to face constrained proceeds and wide spreads. Largo Capital advises clients on how asset quality and tenancy profile affect financing outcomes in the current environment.
3. KingSett and Choice Properties Acquire First Capital REIT in $9.4B Deal
KingSett Capital and Choice Properties REIT (TSX: CHP.UN) announced an agreement to acquire First Capital REIT (TSX: FCR.UN) for $9.4 billion, inclusive of debt. Consideration of $24.40 per unit represents a 17% premium to the 20-day VWAP and an 8% premium to NAV. Choice absorbs roughly $5.0 billion in grocery-anchored urban centres; KingSett takes $4.4 billion in high-street retail. Close is expected in H2 2026, subject to Competition Bureau review.
The deal is a direct consequence of the NAV discount problem that has plagued Canadian-listed REITs for two years. When public vehicles trade below private market values, institutional capital moves in. This is not isolated: Minto Apartment REIT was taken private for $2.3 billion earlier this year, and CAPREIT announced its acquisition of European Residential REIT (ERES) in an all-cash deal at $1.19 per unit. The First Capital transaction is the first premium-to-NAV Canadian REIT takeout in years and sets a reference point for how private capital is pricing domestic real estate assets relative to the public market. The concentration of grocery-anchored and needs-based retail in the portfolio is not a coincidence. That asset class has been one of the strongest performers in Canadian commercial real estate over the past several years, posting high occupancy, stable collections, and consistent rent growth through periods when other retail formats struggled. Lenders and investors have gravitated toward necessity-driven tenancy as an underwriting anchor.
Largo Capital continues to see the strongest lender pricing and proceeds on grocery-anchored and needs-based retail. Retail has been one of our most active transaction categories this year, and we expect that to continue as the asset class draws increasing lender attention.
